Are You Making this Critical Customer Mistake?

For a number of years, if you had asked me what I thought I needed in order to improve my business, I would likely have responded ‘more customers’. With hindsight, I recognise this was only addressing a symptom rather than tackling the cause of sluggish growth, and that to build an organisation of scale and potential I had to create a shift in the way I thought about the client / provider relationship.

I now understand that what I really wanted, was not more clients, it was actually a better, more profitable business and that when I started to really drill down into the data, it became abundantly clear that some of our existing customers, specifically those who were taking up a huge proportion of time and resources, were not actually very profitable. This despite representing a sizeable proportion of company revenue.

Understandably, these types of customers were strangling the business and the situation would certainly not have improved by getting more of the same to show up. It was at this point that we realised that not all customers are created equal.

Fortunately, we’re now lucky enough to work with some of the best players in our industry, and in return, we strive daily to enhance our services so that we can deliver even greater value in the future. But this cycle of continuous improvement couldn’t exist without the support of an enlightened customer, one who understands the difference between getting good value as opposed to dragooning their providers into a profitless and exploitative enterprise. But it wasn’t always this way.

An example of when things are not working…

A couple of years ago, we worked with a customer who made up over half of our business. Our company would send personnel all over Europe, funding salaries, flights, hotels and subsistence, regularly racking up sizeable 5 figure bills, only to be left waiting 4 months or more for payment.

Eventually, after trying to nudge and cajole this customer to improve their account, we had to bring matters to a head. During a fairly uncomfortable call, we let them know that whilst they were an important part of our business we were not willing to be an unauthorised overdraft and if they were unable to improve the situation we would need to part ways. Whilst this was obviously a difficult path to take, it was also incredibly freeing, as it suddenly released valuable resources and allowed us to pursue new business, straighten out cash flow and reduce the stress of worrying about whether we’d get paid or not.

What was most remarkable was that our business became stronger, we began choosing our customers more carefully and surrounding ourselves with like-minded businesses that understood and appreciated the value of good partnerships.

Understanding and tuning your business around this concept will give you the greatest positive impact on the quality of your customer relationships and in turn, lead to a more profitable partnership for both you and the client.

So how do you identify a good customer from a bad one?

Truth is, you probably already have a feeling about this one but, if in doubt, the way to identify the difference is look at the dynamic in your relationship. When you work with an ‘A-grade’ client, it is as a partner. You’ll be appreciated as the expert you should be and one that your client has hired to walk along side him or her towards a common goal.

If on the other hand, your customer simply wants a function fulfilled in order to tick a box you will forever struggle to sell them on the added value that you provide. These are not the type of clients you want.

In short, if your customers do not perceive you as a professional partner, it’s time to get new clients.

Unless there’s a change in the procurement hot seat or you can effectively communicate the shortcomings of building a business around lowest tenders, you will only ever be perceived as little more than a “vendor” and when you’re a vendor, there are basically only three questions clients are interested in: Are you basically competent? How cheap? How fast?

This leaves little room or appreciation for the fact that your business perhaps offers so much more than your cheaper counterparts in terms of quality / reliability / support and the myriad other ways your service can enhance the partnership by going the extra mile.

Here are my 4 recommendations for a better business

  1. Starting today, choose your partnerships well and retain the option to walk away if the other party is pushing for an imbalanced or unfair relationship
  2. Where possible phase out bad customers and replace with new clients over a defined period of time. This will avoid shocking the business financially or imperilling the employment of your team.
  3. Part on amicable terms (where possible). People and circumstances change so try to leave the door open.
  4. Look after those customers who you do decide to move forward with. Reciprocate with value, deliver more, improve daily and aid them toward their goals

Take these four steps and improvements will follow.

If you’ve had an experience of a bad or toxic customer, I’d love to hear what happened and how you dealt with it.

Do you agree with the points above?

Get in touch and leave a comment below, I’d love to hear from you.