The Art of Firing Poor Performing Customers
Many business leaders took some time at the end of last year to reflect on their successes and to look
forward to a new year filled with the promise of more profitable growth. Part of an effective business leadership process that leverages deep business acumen skills is assessing your customer base and identifying customers that are not as profitable as they should be and figuring out a way to either make them more profitable or divest them from your customer list. Imagine what your business would look like if you were able to replace your bottom 5% of your customer every year with new, more profitable business and customers.
Unfortunately, too many business professionals and sales leaders have a difficult time divesting from any customers. And why should they? It is more difficult than ever in 2017 to get a new customer, why would we ever get rid of one?
Defining Customer Performance and Profitability
Not all customers are the same; some are easy to work with, some are hard to work with, some are growing, some are not growing, some are profitable, and some are not profitable. Depending upon your business strategy, you need to take a long hard look at how your organization defines customer performance.
I can promise you that no matter how you define customer performance there is no room in your customer portfolio for a difficult customer that is hard to work with, isn’t growing, and isn’t profitable. What makes an unprofitable customer? When the expenses – physical and/or emotional – are greater than the revenue that is being generated
If you have customers like this or customers that simply don’t fit your strategy anymore, then it is time to start thinking of ways to exit from the relationship.
Tips to Firing a Poor Performing Customer
Below are three tips for successfully firing a poor performing customer:
1) Be transparent; do not “come up with a story”
First of all, you need to either have the conversation live and in person (preferred) or at the very least on the phone. Emailing and texting is completely unacceptable. During the separation conversation you need to be transparent and explain that with your strategy, goals, and objectives it is no longer feasible to provide the same level of product/service and absorb the expenses required to deliver the quality that the customer requires. You need to use specific examples about why the revenue doesn’t match the expenses (discounts too steep, unbillable re-work, unbillable extra customer service, etc.) and you need to present it in a way that is politely relative to other customers such as “The revenue we are generating given the discounts and levels of additional service is about 8% less than our similar customers.”
Once you present the information in a clear and transparent manner, give the customer some wiggle room for coming back and perhaps agreeing to a higher price or reduced support expenses in order to remain a customer. If not, then you need to move on.
2) Give the customer enough time to make other arrangements
Once the conversation has been had and you’ve agreed to move on, give the customer a reasonable amount of time to make other arrangements to find a replacement. The last thing you want to do is get the customer angry which will actually cause you more time and aggravation and could potentially impact some of your more profitable customers.
3) Be positive and forward thinking
Your entire demeanor needs to be positive and forward-looking. There is no need for you to be negative or adversarial. Remember, the customer has put you into this position and you need to find a way to exit it and keep things moving forward. If you handle this well, the customer will realize that this is the best for all and will quickly find another vendor who will be able to provide the value proposition the customer needs at a lower price and with a different service model.
