The customer is always right, according to some people. Even after a bad interaction with a customer, you are under the obligation to cater to their every need. But think about that for a moment. Some customers are not good for business. In fact, you are so concerned about managing your online reputation that you are spending time and effort on people that don’t bring any real benefits to your company.
It’s time for CEOs to step back and carefully consider what is actually right for business. So when is it actually time to admit a customer needs to go?
What is a Bad Customer?
For the purposes of this section, you are going to imagine that you own a restaurant. Each day, the same old man comes in and he orders the cheapest thing on the menu and asks for a glass of tap water. He then sits at his table for three solid hours reading the newspaper without ordering anything else.
You don’t ask him to leave because you don’t want any trouble. Yet every time without fail he spends 30 minutes berating the staff over the quality of what he just ordered. You may be getting about $15 from him each day, and yet you are paying far more than that with the lost table and the lost productivity.
Customers like this provide little economic value and they are taking up an enormous amount of your time. What that customer values most isn’t worth your effort to fulfill. They are not the sort of customers you want.
Analyzing Profit By Customer
Most small businesses are tracking their ROI. One aspect of the ROI is to calculate the profit by customer. This is where you analyze how much your customer is worth to you. You will track the cost of acquisition online and the value of each individual.
Over time, you will gradually start to shed the low-value customers, while spending your time on the high-value ones. You will also take into account the volume of repeat business. This is not an exact science, but these numbers can give you a rough idea of whether a customer is worth the time and effort.
If a customer isn’t worth the time they are taking up, shed them.
Can You Salvage Bad Customers?
Bad customers aren’t always the ones who spend most of their existences complaining about what you have and haven’t done. Sometimes they are simply taking up a lot of your time for a tiny amount of profit. Many independent contractors shed their low-paying clients as they become more successful.
The first way to salvage bad customers is to raise your prices. As a business, you should be raising your prices every so often. Attempting to gain business based on having the lowest prices around will only bring in the cheapskates, which tend to be the most difficult to deal with of all.
The second way is you can cut the costs you are spending serving them. This is difficult, but in some niches you can do this behind the scenes. You may decide to automate some of their services because you already know precisely what they want. By reducing the amount of time spent on them, you increase their value.
And you should try to salvage them because it can cost seven times more to attract a new customer than to maintain an existing customer.
The Flip Side of the Numbers Game
There’s another important benefit to calculating how much a customer is worth. It will tell you which customers are providing you with the most value. It may be that they place a series of regular orders or they have placed one enormous order.
These are the people you should be spending most of your time managing. Effective and selective customer relationship management will ensure that you are using your time in the most profitable way possible.
That’s what business is all about. Once you identify the customers that are effectively keeping your business afloat, you should do more than send them a simple thank you note. Go out of your way to ask them how you can improve your services for their benefit. Go the extra mile and throw in the occasional bonus. This is what will ensure the future growth of your company.
Conclusion – The Customer is not Always Right
When people go into business they assume that the customer is always right. This isn’t the case. Some customers are more trouble than they are worth. In short, they are not worth the effort and you should look elsewhere. When you are dealing with these people, you need to make a decision as to their worth.
How are you going to cut out the bad customers today?