Fire Your Customers – And Increase Your Profits

You’ve heard it over and over again: the customer is king. Just bend backwards and ensure that every single customer is 100% satisfied and serves as a reference, helping you grow your business. However, blindly following this rule can be a very wrong business strategy.

Instead, try to differentiate between customers, and only treat those customers exceptionally well that you want to keep. No, I am not advocating sending all your customers to the competition. But if you really look closely into your customer base, you will surely find some customers that are a pain in the back. You know, those customers that squeeze you for every possible discount, always want more than what you are prepared to give, and are extremely slow with payments. Those are what I consider the bottom 10 – 20% of your customer base.

In most of the cases the effort required to close a deal, to satisfy those customers and to subsequently collect the payment is significantly higher than with your average customer. And yes, the industry in which you are in obviously plays a role in determining whether a customer is worth keeping or not. What constitutes slow payment and difficult customer for one type of business could very well be an average customer for a different type of business or industry. Even within the same industry there are vast differences in the clients that you attract and keep.

The problem is that if you have too many of those slow paying and difficult customers who take most of your time, you don’t have enough time left to dedicate to you’re A-List of customers – those that do pay on time and are grateful for your business. You spend too much time dealing with customers who are not that profitable, and not enough time with those customers that really create value to your business.

Instead of treating all of your customers equally, you may want to consider to separate your customer base into 3 categories: A / B/ and C Customers.

How you distinguish between them may be arbitrary. You may want to categorize a customer as an A customer because he pays very promptly and you never have issues with payment. Or because the profit margin for specific customers is extremely high – compared to your other clients. Or because they are just very influential and very happy about your service, but you don’t make much money with them. Or all three – how you separate them is up to you.

What matters is that you try to convert those A-customers into raving fans. They should not be satisfied with your product, service and company, but rather extremely delighted and enthusiastic about your business. Having enthusiastic customers is indispensible if you want to continuously grow your business. Those customers act as brand ambassadors and will help you get a significant amount of new business through references.

On the other extreme you have C-Clients. Those are customers that for a variety of reasons you just don’t want to deal with. Those are the customers you may want to consider sending to the competition. This move will not only free up your time (so that you can spend more time with you’re A-Customers), but also allow you to take on more (i.e. other) customers which hopefully will turn out to be B or A-Customers, and thus increase the profitability of your business. In addition, by sending those customers to your competition you create additional work for your competitors with a client you know is not worth pursuing.  This keeps your competitors busy with non-value added work. I actually don’t mind if my competitor spends a lot of time dealing with a particular difficult client that takes up their time – I’d rather have them busy fighting for C-Clients than trying to convert my A-Customers.

In the middle of the scale you have B-Customers, which usually form the majority of your business clients. Those are the customers for which you might just want to continue what you are (hopefully) doing now. Treat them well, follow up, ensure you meet their expectations. You might even want to see if you can convert the one or other B-Customers into a raving fan A-Customer.

It is not a bad thing to tell C-Customers that you may not be able to help them moving forward. Ask yourself: if you would loose this specific customer, would it really be so bad for your business? If the answer is no, don’t be afraid to let them go.

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