Are All Customers Created Equal

Are all Your Customers Created Equal?

“The customer is always right.”
“We have to take care of the customer no matter what.”
“The customer focused business is a successful business.”

We’ve all heard or probably said those things.

Have you ever had a customer that you were always happy to see and were happy to see you? Your transactions always went well, were profitable and they never complained about price, paid on time or early and generally were a pleasure to work with. You probably found yourself looking for ways to make them even happier, right? This was why you started this business, right?

Then there’s the customer that complains about everything, never happy, never satisfied, complains about the price, demands discounts, pays late, and is overly demanding. Everything is a crisis and is never his fault. Your stomach tightens and you can feel the perspiration on your forehead the moment you see his number on the caller ID. It shouldn’t be this hard. It would be great if you didn’t have to deal with this customer but sales are sales and you just have to put up with it.

Wouldn’t it be great if all customers were like our best customer? How great would it be to only have to deal with the great customers? Well, maybe it’s time to fire some of those pain-in-the-neck customers and, believe me, this will be one of the hardest things you’ll ever do. We as business owners only think about that next customer, that next sale. If we take a deeper look, we may see that all customers are not created equally and, more importantly, some customers are not worth having.

We’ve all heard of the Pareto Principle, that 80% of our revenue usually comes from 20% of our customers. What if there was a way to use the Pareto Principle to really concentrate on your best customers, meet their needs efficiently and have plenty of time to think of ways to make their experience with you better. What if you could forget about all those other customers that are constantly complaining and demanding this or that taking up far too much of your time. There is – fire those customers!

So how do you know which are the best customers to get rid of?

Try these steps to identify customers you may want to fire:

1. Copy your customer list down the first column on an Excel spreadsheet.
2. Across the top columns, list all the attributes of a great customer: profit generator, pays on time or early, orders regularly, etc.
3. In each attribute, rate the customer from 1 – 5 with 1 being worst and 5 being best. After the last column sum the row to get that customer’s score. You can then use the sort function to sort your list from best to worst by using the sum column.

Now that you’ve objectively identified your problem customers, you have to come up with a plan. Here are some strategies to think about:

Fix what you can fix . Review each problem customer and think about all the things that cause you pain. Are there ways that this customer can be saved? What can be done to eliminate the problems? Maybe there are solutions that can be used to save the relationship.

Be honest . You don’t want your customer bad mouthing you to other potential customers so you need to be very sensitive as you explain your decision. Tell the customer that you have worked hard to service their needs but feel they would be a better fit elsewhere. Refer them to a competitor and make the introduction for them. Follow up to make sure that the transition went well.

Don’t look back . You’ll miss the lost revenue at first but the extra time will allow you to focus on maximizing sales from your remaining customers. The most likely outcome will be a drop in sales but usually your gross profit will hold steady.

Look in the mirror . If you seem to continually attract the customer from hell, perhaps the problem is you. Maybe your marketing is not targeting your ideal customer. If you did the customer analysis you should know who your ideal customer is now. Test different marketing tactics to attract only that customer.

David Oetken

Center Director, Louisville SBDC

Dave Oetken has worked with the KSBDC since 2011. Dave began his business career in the sports/entertainment industry, primarily in ice skating and ice hockey. He has owned and managed three ice rinks and earned the Manager of the Year award from the Ice Skating Institute of America. In addition, Dave was operations manager for several professional ice hockey teams in both the East Coast Hockey League and the American Hockey League. He has also owned, operated and sold several businesses in the food industry. From there he moved into the restaurant field, owning and operating a number of franchise concepts. Since 2005 he has owned Louisville News company, one of the largest distributors of thoroughbred horse publications in the eastern United States. David has a B.A. and M.B.A. from Bellarmine University. He remains active in his community, serving as a SCORE volunteer since 2003 and is a past vice chair for GLI’s Small Business Innovation Committee