Not making any money off of a customer goes beyond your commission or bonus. It’s the bottom-line profit your company is not making because of the customer. No salesperson is going to intentionally go out and find unprofitable customers, but too often we do end up with a few of these.
We all have at least one – a customer with whom we just don’t like working. Before you get too excited thinking I’m going to say it’s okay to fire any customer – regardless of the reason – guess again.
What I am talking about are customers we don’t like because after we do everything we do for them, we simply are not making any money from them. Not making any money off of a customer goes beyond your commission or bonus. It’s the bottom-line profit your company is not making because of the customer. No salesperson is going to intentionally go out and find unprofitable customers, but too often we do end up with a few of these.
We wind up with unprofitable customers not because of the price we’re charging them, but because of the intensity of their demands and requests. You know what I’m talking about. It’s the customer who seems to always want one more thing. No matter how good of service you think you’re providing them, they keep asking for something more.
The problem we get into is the more we serve the customer, the more they expect from us. Each time we help them, they come away thinking of something else they want from us. These ongoing demands on your time (and the time of other people in your company) are what quickly erode profit – turning a once profitable customer into one that is completely not profitable.
What is even more disturbing is that often this dynamic happens so slowly that we don’t even realize how unprofitable they have become. This “slow drain” means that it usually gets way out of control before anyone realizes how bad the situation is.
To be able to determine which customers need to be “fired,” you must become more discerning of customers who place too many demands on you and/or other people in your company. It is absolutely essential you get control, because if a customer becomes high maintenance, there is a great likelihood they will remain high maintenance.
As the salesperson servicing the account, you are often the one in the best position to realize how high maintenance the customer has become. More than likely, most of the customer’s requests are flowing through you. You then dole these requests out to the respective departments, but collectively all the departments do not see the big picture of everything the customer is demanding.
The High Maintenance Customer
Once you spot a trend with a customer making multiple service requests, you must begin detailing the cost involved. A detailed account of what has transpired will help when you and management need to decide how to deal with the customer.
Once you have identified an unprofitable customer, you and your company must decide what is going to be done about the customer.
Too many times, companies roll over and play dead and allow the customer to continue to be high-maintenance. In the end, the only thing that happens is profit is lost and sales motivation is depleted. You and other people in the company become disenchanted with the amount of support devoted to a customer who never seems to be happy.
If, on the other hand, smarter heads prevail, then you and management will realize something needs to be done to rectify the situation.
There are two options:
1. Confront the customer. Your objective is to decrease their requests.
2. Increase their prices. This will offset the additional costs you incur serving the customer.
Personally, I prefer option #2. The reason is simple. Increasing their price either restores your bottom-line profit or they reject your price increase and leave. Essentially what this option does is allow you to make the profit you need – or it releases you from a customer who is draining your profit. Either way, you and your company are winners.
This is a much better option than the first choice of confronting the customer. I’ve found that confronting the customer tends to create a level of tension that winds up as long-term friction. Ultimately, no one is happy.
If you raise your prices for those difficult customers, you will gain the profit you need or the customer will walk away. The beautiful part of using this approach to “fire” your customer is that they leave without you ever having to tell them you are firing them.
Profit is good. Don’t sacrifice it in the name of “good customer service.” Wisdom tells you that the best service is that which satisfies your customer and allows you to make a profit.Your time is best spent on profitable activities. For more information on implementing a price increase, consider this article section of my website.
About the author
Mark Hunter, "The Sales Hunter," helps individuals and companies identify better prospects, close more…