How To Deal With Problem Customers

by Tom Egelhoff

You've heard me say many times that customers are the life blood of any business. The first thing you will learn on the first day of business school is that nothing happens till someone sells something. Customer service, customer satisfaction, customer loyalty, customer retention are current "buzzwords" we've all heard. We are taught to move heaven and earth to keep our customers happy. The most common tag line is "The customer is always right." But is that always true? Is there a time that the customer is not right? Is there a time that we want to kiss that problem customer goodbye?

We've all seen books and seminars that deal with delivering top notch customer service but it seems that few people want to talk about the problem customer and how to deal with them.



What Exactly Is A Problem Customer?

In order for you to evaluate the value of this article for your business I feel I should give you my definition of a problem customer. I'm not talking about the customer who might be upset about a one time service issue or complaint about a product.

For me a problem customer does two things on a regular basis. One, their demands disrupt the normal flow of business for you and your employees and two, their demands usually produce a lower profit margin per job or purchase than their business is worth. They may be billed for a gross dollar figure that appears high but internal intangible costs to satisfy them may produce an unsatisfactory profit margin. They will often feel that they deserve special treatment and their demands are justified based on what they spend.



Who Decides When A Customer Falls
Into The Problem Customer Category?


It will probably be one or more employees who alerts the business owner to the problem. customer. The bookkeeper can confirm the situation comparing cost of the job or project.

I suggest that business owners arrange your customers in A-B-C-D order. A list of your best most profitable customers would be your A list. Those who do less business or are more problems are ranked accordingly in a lessor category. See: "Tip #50 - "Rate Your Customers For Surprising Results" in 101 Ways to Boost Your Business Anywhere."

The danger of this is being inflexible. Customers and businesses are never stagnant. A business can grow and become a good customer and move up your list. If you are going to use this method then be prepared to re-evaluate your customers periodically.

The other person who can help evaluate or identify problem customers is the outside sales person. The sales person should bring any problems to the attention of the owner or sales manager and lay out the details of any problems. Once an evaluation is made the outside sales person can simply stop calling on the customer unless the customer calls the salesperson.



Determine The Problem And Try To Resolve It

Before we can determine if we are going to "fire" this customer we need to identify the problem and address our concerns with the customer. Often it's simply a matter of the customer not understanding what your business capabilities and procedures are. If you need a specific amount of time to complete the customers job then you need to explain that. If they can work within your perimeters perhaps you can retain this customer without loss of profit.

Always address the problem with the customer with the idea that in order to provide the best service the customer will want to do things in a way that will capitalize on your efficiency.

If the customer can't or won't work with you then it's time to make a decision whether or not this customer is worth keeping or if the time has come to fire them.



How To "Fire" A Customer

You've gone as far as you can go and the time has come to send this customer somewhere else. How do you do that diplomatically? After all, you don't want the customer spreading negative word-of-mouth about you to other potential customers. There are a couple of approaches you can use.

  • The "TWEP" method - This stands for "Terminate With Extreme Prejudice." My attorneys have advised me that I should not recommend this method for obvious reasons so I don't. As much as you might enjoy shooting some customers and as much as they might deserve it consider other options.

  • The "parking meter method" - This method simply means as long as you feed the meter you can park here. If you want a package delivered over night it usually costs more. It's the same with problem customers. If they have demands that require additional resources or create problems then they should expect a surcharge of some kind.

  • The "Dear John" letter - A formal letter outlining that you are sorry that you can no longer provide the service and or procedures that they require and when the current project is completed you would prefer that they obtain future services elsewhere. It shouldn't be an angry letter. Keep it strictly business. It's not personal it's business. It's profit and loss. Attorneys use this method to let clients know that continuing to pursue a case they can't win does no benefit to anyone.

You should never end a business relationship negatively if you can help it. Explain your business position in dollars and cents and in most cases your customer will appreciate your honesty and integrity. You would normally not want to terminate your relationship in the middle of a job. Keep your commitment even at a loss and keep your good name in tact.



The Last Word On Problem Customers

Most problem customers are created not born. Somewhere along the line you probably gave them some extra ordinary service that you could not consistently maintain. They assumed that this was your standard service and that became their measure of your abilities. If you made an exception to provide them with something extra be sure to let them know that this was something special and not the norm. You can head off a lot of future problems down the line.

Most problems are a matter of mis-communication between the two parties. These can often be detected and resolved long before the customer becomes a problem.


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