We have all heard the term “the customer is always right”. This is a very dangerous way to view your customers. Adopting this approach to all customers will only leave you run ragged and broke. If you’ve been around long enough you will have come across some customers that are so challenging that you really have to grit your teeth and force a smile to say “the customer is always right”. There are some customers that are just plain wrong.
As I re-read those lines I can hear you saying “hang on Tombs, this looks like your going down the path of telling us we should reject some of our customers”.
Well, that’s exactly what I’m saying. Some customers just aren’t right for you, however; the RIGHT customer is always right.
Where Is The Customer Wrong For You?
Let me explain through a real life example: At one stage I had a company that supplied toilet paper and cleaning chemicals on a B2B basis. We brought on a very large publicly listed company to supply them with all their toilet paper and hand towel requirements. This potential customer would have been a really good ‘flag waver’ for us, and had a large volume. It increased our turnover by 8% overnight so it seemed very, very important to me to get it. We cut our profit margins to a bear minimum to get it and the agreement was that if they placed their orders before 11am we’d guarantee delivery the next day anywhere in the country.
The first couple of weeks went by without a hitch then we started to get orders at 2pm on a Friday wanting immediate delivery across town because there was a function happening that night in that branch. Of course by the time we picked the order and then negotiated the heavy traffic at that time of day it turned a one hour trip into a three hour trip, we were cutting it pretty fine to say the least. Fairly soon this type of thing was happening all the time and was taking all our resources away from servicing our profitable customers and putting them into servicing a customer with very marginal profit. This meant that our service to our other profitable clients was starting to decline. Then they didn’t pay us on time. So we were faced with a challenge, our creditors wanted payment, we weren’t getting paid, we were putting all our resources into a customer that was unprofitable so we were loosing money and neglecting our other good customers which, if left un checked would mean that we would loose them and our business would start to decline.
What To Do
It was a very tough decision, however I decided to put them on stop credit and told them that yes we would still supply them…once they had paid. They weren’t very happy and consequently didn’t ever use us again. So our turnover dropped back down that 8% immediately. The truly amazing thing that happened was that we started really concentrating on what the right customer was to us and within 6 months had made that 8% increase in turnover back up, the bonus here is that now that 8% increase was with profitable customers that paid on time. How great is that!
Keep this saying in mind: Profit for sanity, turnover for vanity
How To Find Out Who Your Right Customer Is
Four things to consider when deciding if someone is your right customer are:
Do they need your product or service. There is no use at all in talking to someone about a product or service that they don’t need or want. You’ll lose the sale every time. For example; if you supply a range of products to the building industry covering builders, electricians and plumbers, no matter how passionate you are about pneumatic nail guns if you are talking to a plumber about them you are, in general wasting their time and yours. If you are selling houses and your people have said that they don’t like open indoor fire places and you go and show them a house with one, you will loose and it’s your own fault.
Can they afford your product or service. Make sure your people can afford what you are talking to them about. If you are talking to someone about a $50,000 car and all they can afford is a $20,000 vehicle what answer do you think you’ll get from them when it comes time to authorize the paperwork? We can avoid this embarrassing situation by simply asking them what range they’re looking in. If they are vague give them three options, one you think that is out of their range, one that is ‘cheap’ and one that is right in the middle. Most of the time they’ll take the one in the middle. If you are talking to someone about using your services or products and they can’t afford it they can only give you one answer. The answer you don’t want. It is better to find this out right at the beginning if you can so you don’t waste theirs or your time.
Someone that will pay on time. Money coming in is the lifeblood of any business, you can have sales galore, however if you aren’t getting paid for those sales how are you going to pay your creditors? The longer someone takes to pay you the more interest you are paying on your overdraft or business loan. If you leave it long enough the sale ends up costing you money. A sale is not a sale until the money is in the bank.
Someone that will work with you. If you have a customer that is always difficult to work with, always unreasonable, chances are they also won’t pay on time. You will end up resenting them and the relationship can turn quite sour very quickly. That in itself isn’t so bad, however they are very likely to bad mouth you and your company around town and in that case make it difficult for you with any new people that you are approaching. You’re better off not working with them and putting your time and energy into people that will work with you
I understand that having a shift in your mindset from “The customer is always right” to “The right customer is always right” can be a challenge. The thing is that if you are working with the ‘right’ customers you will be a lot more positive and when you are more positive it’s a lot easier to attract more of the ‘right’ customers to you. If you are trying to work with the ‘wrong’ customers all day every day you’ll just head into a downward spiral that will end with you making no money.