By Doug & Polly White, entrepreneur.com, 09-07-2014
Not every customer is ideal. Some are so bad, they can make us wonder why we decided to start our business.
Let’s face it -- sometimes there are good reasons to fire a customer. When a relationship becomes badly damaged, it can be the best for all concerned. However, deciding not to serve a customer is a very serious decision that should not be taken lightly. We suggest four steps to take before you make this move.
1. Try to fix the problem. Customers are the lifeblood of business. Without them, the doors close. Customers are difficult to attract and replacing those that leave is expensive.
If there is a problem with a customer, a wise businessperson assumes that the problem is the fault of his or her company and goes to extraordinary lengths to resolve the issue. Resolving the issue and saving a profitable customer relationship is a win for the company and the customer. If at all possible, fix the problem.
Pepper Laughon, a successful business owner who took Richmond Cold Storage from a fledgling company to a thriving enterprise, told us that he had one very important rule: he is the only person in the company who could tell a customer “no.” Customers were almost never told “no.”
The point is that deciding to tell your customer that you cannot do what he or she wants is a very serious decision that should be made only at the most senior levels. Nevertheless, on those rare occasions when the customer simply cannot be satisfied -- drastic action may be required.
2. Do the numbers. Before deciding to fire a customer, ensure that you understand the financial implications. Consider not only the variable contribution from that account, but also the cost of replacing the customer, and the cost of the former customer sharing negative experiences with others.
Statistics say that a satisfied customer will tell one person, while an unhappy customer will tell seven, eight or perhaps a dozen or more people. Small businesses cannot afford dissatisfied customers.
3. Consider all of the costs. It’s also true that the cost of serving a bad customer can go beyond dollars and cents. For example, a customer who is abusive to your staff can demoralize employees. In some cases, the mistreatment could lead to employees choosing to leave your organization.
Further, if the abuse is severe enough and/or goes on over a long period of time, your company may be liable for damages if you don’t act to resolve the problem.
4. Don’t burn bridges. If you do reach the difficult decision to stop serving a customer, end the relationship as pleasantly as possible. Don’t say that you are ending the relationship because the customer is horrible.
It’s better to explain that, while you are very sorry, your company is not geared to meet the customer’s expectations and that his or her needs can be better served by someone else. This will reduce the number and severity of negative comments and leaves the door open for a future relationship if the situation changes.
Deciding to fire a customer is a serious decision. It should happen very, very infrequently. However, if the time does come, following these steps will result in the best possible outcome.