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How To Fire Your Worst Customer

IMB-How-To-Fire-Customer As a marketing writer, most of the topics I choose to cover are focused on building your business. Ways to promote, sell, motivate or acquire customers are all important and deserve the biggest share of the conversation when it comes to marketing your business. One thing most business owners don't consider, however, is whether their best business decision may actually involve FIRING some of their worst customers. While this may seem like an illogical suggestion (particularly in a bad economy) – having the wrong customers can be costing your business in unexpected ways and holding you back from real success with the temptation of short term profits.

You may be stuck in a raw deal with minimal margins, or be losing the ability to service new and more profitable customers as a result of tying up your resources with a single customer. Additionally, you might have issues with employee turnover due to burnout from servicing a demanding or abusive customer, costing your business as you continually need to recruit and train new team members. There is no single definition for a "bad customer" – particularly since we tend to see customers in general as always being a positive thing. The fact is, however, that bad relationships can occur in business, just like in life. Part of the challenge you will likely face (if you haven't already) is how to extract yourself from those relationships without burning bridges or creating enemies.

Here are a few steps for how you can navigate dealing with your worst customers, and professionally get rid of them with your dignity and reputation intact.

  1. Uncover the real issue. The thing about "bad customers" often is that it can often be due to a combination of circumstances that evolve over time. Few people enter into a business relationship they know will be negative from the start. When it comes to identifying your worst clients, part of what you must be willing to do is looking deeper to uncover the real issue that has caused your relationship to sour. Is your main customer detached from the day to day and now you are dealing with a subordinate who lacks ability or knowledge? Could it be a clash of personalities between your employee and the customer causing the friction? Digging deeper to learn the real issue is a necessary first step to give you insights on how to handle the problem and most importantly, to learn whether this is really a customer you need to get rid of.
  2. Fix what you can fix. Once you get to the heart of the issue causing the negative relationship, you need to try and make an impact on your own end. If there is an irreparable difference in personality between your team members working with the customer, try changing the team on your end. If there is a contractual issue, try to work with the right people to resolve it. Showing good faith to fix what you can fix from your end will be important not only to try and salvage the relationship, but also to demonstrate to your customer that you are really trying to make the relationship work better.
  3. Raise the issue. Once you have exhausted all possible solutions on your own end, it may be time to raise the issue in a sensitive way with your customer. This should obviously be treated with care, but in the best of cases, your customer may not realize the issue they are causing for you and your employees and be open to making a change. Even if they are not, this is an important step if you eventually do decide to "fire" them as a customer.
  4. Establish a "3 strikes" approach. Assuming your activities to fix the issues are not working, you need to establish a clear path forward. This is not always something that you can communicate to your customer, but internally your employees need to know that there is a process that you will be using to put the customer on final notice before you make a decision. These "strikes" can be anything from repeated negative behaviour to recurring months with low margins.
  5. Terminate and refer. Once you have reached the point where a change must occur, you owe it to your customer to be upfront about the issue and your intention to terminate your relationship. Your aim at this stage should be to remain positive and resolute by following through on your decision. This is the point where you can lose the respect or trust of your employees if you fail to take action, so making the hard decision a reality is crucial. You should also have a strategy in place to help your customer get to their next relationship as well. Just because your relationship with a particular customer was not positive does not mean another organization might not be able to have a more productive one, so do your best to find a good referral and make the connection for your customer. 
  6. Move on. In the first few months it will be easy to focus on the lost revenue from that customer, no matter how minimal it may have been. Losing the drain of that customer, however, can be the best thing to happen to your business. Use the fresh start to refocus on all your other current customers to make sure none of them get to the same stage – and more importantly, put a plan into place to replace that customer with one you and your team would be thrilled to have.

This post is republished from my original article on the Amex Open Forum website. It is part of "Small Business Friday" on this blog, where I share ideas and marketing techniques specifically to help small businesses stand out. To read more articles like this, visit the "Small Business Friday" category on this blog.

  • http://www.abundatrade.com Tracy

    Wonderful post. While many avoid conflict when we can, as you point out, a “badâ€￾ customer can drain resources to the point where they negate the business they bring to your company. Even more poignant in today’s economy when we all have to watch where our time and money is going more carefully.

  • http://sylvanmedia.com/blog Mike

    Thanks for the post.

    This is a very unique perspective and one that is often difficult to decipher. Having clear expectations for the relationship at the beginning is a very useful tip. We will always have to interact with personalities that may not align directly with the personalities of the organization. Your suggestion to reorganize how we work with the client, specifically reorganizing team structure in addition to being clear on how to resolve the situation is probably one of the best suggestions I have seen.

    Thanks again for the post,

    Mike

  • http://www.jivaldi.com Shara

    We make a huge mistake looking at the dollar signs and ignoring the red flags. Some people just aren’t worth the headaches that come with them. If a client is a bad fit, its time to cut them lose and more on. No need to waste even one more minute on them ! Great article ! I have seen my fair share of “bad clients”.

  • http://www.ThunderBayMedia.net Derek Cromwell

    I think it’s important to remember to “refer”. If you’re in business for yourself then there’s a good chance you’ve had a relationship with a client tank for one reason or another. The frustration can make it easy to severe the relationship and burn a bridge but referring the client to another professional is often the best way to keep the departure positive and have a great reference point for future clients.

  • http://www.indonesiaadvertising.org Gerard Prastudya

    It is good that what you write, its the topic we seldom not aware and tend to avoid because in my time customer are the one who bring cash to the company. I agree that sometimes there is customer that drain our resources like you said in the earlier, but in overall how we know that the customer need to get rid of ?

  • http://www.marketingpundit.com Deep Banerjee

    This is a wonderful article. I’ll surely refer you and your article on “How To Fire Your Worst Customers” to my corporate clients during serious meetings or corporate get togethers. I will also make mention of this article to my students at B-schools pan India.
    Thanks for thinking about this article in the first place.

  • Martin Thunman

    I doubt it is legal in many countries to refuse orders from customers. You are not allowed to discriminate customers from a pure legal perspective. But, hey – I suppose people choose to ignore that fact and count on that no customers will make a legal complain for being “fired”.

  • http://www.sta.co.nz Steve Punter

    Excellent post. In my day it was called ‘client base upgrading’. It was linked to the good old 80/20 rule (80% of your problems come from 20% of your clients). Find that 20% and focus on them to either improve the situation or ‘fire’ them. Sending them to the competition is a great idea :-) because you win both ways.

    However, the whole thing hinges on your ability to replace that client, so if you don;t know how to create new business, you better learn fast or put up with what you’ve got.

    Years ago a celebrity high-achieving Insurance sales professional (Frank Betger) said in one of his books about self-confidence.. “Each year, pick a client that is important to your business but problematic, and stop dealing with them”.

    As to the legality of it, another way to do it is to charge them a premium price at 20-30% above normal. I call it a ‘stress premium’. I feel better about doing business with them – even though they may be a real P.I.T.A. to deal with them -because it’s worth it! And of course if they leave you because of the price, you’ve achieved your aim.

    Cheers

    Steve Punter
    Auckland NZ

  • http://www.webcritic.co.uk Charles Clayton

    Firing a client was one of the best days of my life. He turned from a snarling pompous person into a weak idiot in 10 seconds. The company happened to be the largest supplier of automotive fabric in Europe. I had nothing to lose so…boom! They paid their bill in 3 days and we start being friends again! Well almost!