Stop trying to impress bad customers and cut them loose. There is a marketing rule that 20% of your customers should be let go, here is how
Estimated reading time: 6 minutes
Table of contents
- Sacking customers does not sound right
- Cull the marketing list
- Where to start deleting customers
- Small value accounts can be let go
- Controling support lines
- When the delivery cost is too high the customers leave
- Carrying debtors means an investment in money
- When you give customers a break it will bite you
Sacking customers does not sound right
It might not sound right however it can save you a lot of money.
Let's start with Pareto's 80-20 rule. This applies across so many areas that it can not be ignored and has been proven many times over.
20% of your customers will give you 80% of your business. These are the ones that you should bow and scrape to so that you survive a lasting relationship.
On the other side of this coin, 20% of your customers will be responsible for 80% of your expenses. You will spend time trying to placate their small issues and bowing to their demands and they spend very little.
Cull the marketing list
By concentrating on the bigger spenders you can increase sales and return by just a small change. Ok, you could have some promising people in the bottom dwellers that you can pull out but the rest of them are left to their own terms.
Your time is taken in serving small quantities and those time-consuming, often complaining and return-orientated buyers drag you down
The delighted customer may still be in the un-loyal group.
What your customers want is satisfaction and ease of transaction and loyalty will follow.
A survey by Harvard Business Review found that;
Twenty percent of the “satisfied” customers in our study said they intended to leave the company in question; 28% of the “dissatisfied” customers intended to stay.Harvarb business review
Further to this was a study by Bell corp that found The number one cause of undue effort for customers interacting with contact centers is the need to call back …
Issues are not fixed on the first call, they lag on and create dissatisfaction.
Where to start deleting customers
First of all, any income is good income so we don't want to be too rash in our decision process here.
If you have an email list or newsletter list, ( if not you should have) then look at those that never open a mail and make a decision to cut them.
These are people that are either just not interested or the person opening the mail cleans out anything not relating to the day's activities. This is a process in the medical field where reception gets the mail and makes a decision for the Doctor or Dentist etc.
Without offering a substantial bribe you are not going to get past them, so give up and delete them from the list.
This will save you money and provide more accurate statistics.
Small value accounts can be let go
Next is your list of account customers. 20% will be occasional users and often for small amounts. Managing your accounts has a high-cost value so stopping a few of these will save you money. You may lose a few but they are not making you rich, in fact probably pore so fret no more.
If you are a bit shy on this consider applying a $10 a month account fee and they will make the decision for you.
Controling support lines
The major retailers woke up to this a long time ago. They traditionally required a lot of proof when goods were to be returned. Now they just accept there will be a level of returns and replace or exchange without a fuss.
However when you find those that exploit the system, and there will be some, making their life hard will be akin to pushing them out the door. Problem solved
When the delivery cost is too high the customers leave
This is particularly so for small-value purchases. However, are these buyers consistent in small value sales and just working the system.
It is usual that the same offenders continue the practice time and time again. Creating a price barrier will upset them and more than likely have them try elsewhere.
Delivery costs can be a killer for small-value orders. Ensure you have procedures in place to control the way this pans out.
Stop trying to impress bad customers and cut them loose by controlling your money
Carrying debtors means an investment in money
A small group of your customers will run the payments out well past the 30-day threshold.
In my experience, these are generally businesses that stand a high chance of not being able to pay at all and causing a loss carried over several months of purchases.
They may be well-intentioned however it is funds that you need to invest to carry their credit and funds that could be better spent elsewhere.
But what can you do?
First of all, stop the credit line at a certain time and lessen your loss.
Apply a healthy late penalty that they must pay
Ask them to find a loan account to carry out the late payments.
Suggest they take their business elsewhere.
These accounts cost you money. not only in the carrying cost but management cost and taking your time away from more important matters.
If you start hard and fast with your rules you will gain respect. The softer you are the harder your customers will work against you and change will be difficult.
When you give customers a break it will bite you
I am a softy at heart and always have an ear for the hard-luck stories. In my many years in business, these are generally the customers that leave me out of pocket.
These individuals will always have a future filled with promise that rarely materializes.
Just this year I will write off half a dozen customers in this exact position. All good people with good intentions but the reasons they are where they are are the same ones that stop a future.
Making excuses for them is generally just avoiding the hard decisions.
That is why I advise in setting rules early in life and sticking rigidly to them for both your customer's benefit and your peace of mind.
Don't avoid these confrontations in the name of goodwill or whatever your excuse to avoid the issue.
Cull your small customers
Manage the return policy
Fix the supply lines
Wipe out doubtfully debtors
install rigid rules and follow them.
You are not a charity so don't act like one.