Most of the time, you won’t know that your customers are bad until you start working with them. By then, it might be too late.
But what do I mean by bad customers? Bad customers are people who bring you stress, sorrow and grief. You spend a lot of time, manpower and resources to fix the unfixable and meet their standards. It’s when these clients become a greater hassle than the money they pay you. In fact, they might even cost you money!
You could have spent the time, manpower and resources to serve good customers who are a better fit for your business. These good customers really listen to you. They learn and adapt based on your recommendations. You also learn new things from them. The best part? Good customers allow you to grow and challenge yourself.
Do check out my blog post on the warning signs of bad customers and how to deal with them.
I’ll touch briefly on how you can avoid these bad customers in the first place but the focus today will be on the steps you can take when you’re already working with these unfit customers.
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1. Identify Your Bad Customers
Ask yourself if you dread working with certain clients. Or if certain projects are causing you a headache.
Do you avoid calls from certain clients? Do you cringe at the thought of your next meeting with this client?
These are warning signs that should not be ignored. If working with certain clients is negatively affecting your physical and/or mental health, you should re-evaluate your relationship with these clients.
Thus, the first step that you need to do is identify these unfit customers.
2. Determine Their Value
Acquiring a new customer is 6 to 7 times more expensive than keeping a current customer. With such high customer acquisition cost, it’s only natural that you want to retain as many customers as possible.
However, there are some questions you need to ask yourself before you cave in to these existing customers’ every demand:
- Are these customers worth it?
- Do these customers have any value?
- What kind of value do they bring to your business?
- What is the value of keeping these customers?
- Is the value high enough for you to spend so much effort?
Ultimately, you need to weigh the cost versus profit. And this is where you need some kind of tracking tool or system.
- Support Ticket software: how many tickets do these customers generate
- Time Tracking software: how many hours do your team spend working for these clients (including production & revision)
In addition to this quantitative data, you also need qualitative data. I recommend that you get feedback from the team on the ground. Your team members who work directly on these clients’ projects will know exactly the pain and nuances of working with these clients.
For example, your designer or copywriter might complain that these clients request numerous changes (which your company might not charge). Or your account manager might complain that there are multiple stakeholders with conflicting views and expectations. This will not only negatively affect the team who is working on the project but your account manager will have to spend more time and effort resolving these conflicts and ensuring that the team can complete the project on time. Your customer service team can also provide feedback on how much resources and manpower are required due to these clients’ requests.
Take all this data and feedback into consideration. If these customers are costing you more than the amount you’re paid, it’s a red flag that they might not be the right fit. If these customers are reputable brands, they may be worth the headaches.
Also, think about the consequences of losing this client. Are you in a situation where the risk is great and you can’t afford to lose even one client?
3. Talk To Them
Whether you choose to retain your customer, your next step would be to have a talk with them.
Be honest and tell your clients frankly about your concerns. Clearly explain what’s not working, what you can and can’t do. The point is to manage their expectations.
If you’re keeping this client, you need to ensure that both of you are on the same page.
Remember, the goal of this conversation is to move your relationship with this customer in the direction you’ve decided after determining their value. Do be tactful and don’t burn any bridges.
4. Refer Them To Someone Else
Sometimes, these customers aren’t bad. They’re just a bad fit for your business. Perhaps, they require a product or service that you don’t provide.
You can thus refer them to someone else who is a better fit. If you know your industry and competition, you will be able to suggest another company that provides the products or services that these customers require. On top of making your customers happy, you’ll gain a friend in the industry. If you’re unsure, you can always ask the company if they want the referral.
If your customers are truly bad (check out the warning signs of bad customers), I don’t think you should refer them to people you know or work with. The company you refer to will not appreciate this and you might even sour your relationship. Neither should you be referring these bad customers to your competitors. It’s unethical.
5. End The Relationship
This is hard. But a bad fit is a bad fit. A bad customer is a bad customer.
Rather than hurting your business, it’s better to let these customers go.
But how do you go about doing this?
First, you need to get the right person to convey this message. Probably someone with authority like a manager.
Next, when conveying the message, it’s better to be straightforward and decisive. Your intention to end the relationship should be clearly conveyed to your client.
However, you still need to be tactful. You shouldn’t be saying things that will be considered a personal attack. For example, “You’re difficult to work with” or “You demand too much”. Instead, you need to frame your message in a nicer way. For instance, “I’m sorry but I don’t think our product/service is a good fit for you”. After all, everyone deserves to be treated with respect and you shouldn’t be ending your customer relationships on a sour note.
Also, you need to offer alternatives or a transition plan out of your business. You shouldn’t leave your clients hanging. Instead, let them know how they can move forward without you.
Bonus Tip: Don’t Acquire Them In The First Place
When you’re finding prospects, it’s recommended to do some research about these prospects. This includes the prospects’ products and services, their industry, annual revenue etc. Most importantly, try to figure out what they’re lacking or need help with and ensure that you can fill in this gap.
Based on this in-depth research, you can then decide whether to go ahead and pitch to them. This will minimize bad customer relationships stemming from mismatches and ensure that you only work with clients who are the right fit.
Other reasons for bad customer relationships are poor communication and unclear expectations. You need to ensure that all expectations are communicated and crystal clear from the beginning.
Also, it might be tempting to see any customer as a good customer. But this isn’t always the case. There might be high-touch clients or clients who are new to the product and service and thus, need your guidance each step of the way. As mentioned earlier, you need to weigh the cost and profit. Do price your products and services appropriately, especially if this new client requires more resources and manpower.
Now It’s Your Turn
How do you deal with bad customers? Do you have any tips to share with fellow entrepreneurs?