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Not All Customers Are Equal

Ever thought of classifying customers according to their value to your business? If you are like most business owners the answer to this question is “No”.

Yesterday I co-facilitated our all-day planning workshop for business owners. The purpose of this workshop is to help owners plan what they want to accomplish during the second quarter of 2014. We had a lively discussion around this concept of tiering customers by their value to your business. The Pareto Principle applies to most businesses, meaning 20% of customers provide 80% of profits. Think of “A” customers as being Awesome; “B” as Basic, “C’” as those you Can do with or without, and “D” customers are those that Drag down your profits. Take the time to tier your customers…you will be surprised at what you find.

I highly recommend that you establish criteria and evaluate your customers against that criteria. Possible evaluate criteria include:

  • Size of profit from that customer
  • Referrals received from customer
  • Timeliness of their work
  • Behavior when dealing with your team

Think of your “D” customers as those who demand lots of your time, nick and dime you over price, and are difficult to satisfy. These customers are costing you more than they are providing so either fire them or significantly raise the fees they pay you. The lure of their revenue usually keeps owners from firing these customers until the owner is reminded that D customers:

  • Consume their time…time that could be used soliciting more “A” and “B” customers
  • Wear-down their team adversely impacting team morale
  • Typically pay them a lower hourly rate than their best customers

Your team is your most important asset, and you must do everything you can to protect them. If it means firing a customer, two or more, then it’s worth it for the well-being of your team.

Should all “difficult” customers be fired or asked to leave?

There is a distinction between a challenging (demands much) customer and those who suck your time and energy and argue over price and pay late. Though challenging, the former types of customers can actually help the business grow by pushing comfort zones and expanding product offering. Think twice before firing these challenging customers, but don’t hesitate to fire your “D” customers.

So how do you fire your “D” customers?

In all instances and as difficult as it may be, you need to be professional, calm, and emotionless. The conversation will most like be difficult as customers in these situations often get defensive and make accusations. You must remain firm and calm. You need to be tactfully firm and avoid doing anything that will cause your customer to tell others, some of whom could be current or potential customers.

If you want to discuss your “D” customers and how to either fire them, suggest they move to a competitor or raise your fee to them, I’ll be happy to speak with you.

If you want to discuss your “D” customers and how to either fire them, suggest they move to a competitor or raise your fee to them, I’ll be happy to speak with you.

Jeff Lovejoy

770.988.1844

jefflovejoy@actioncoach.com

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