Customers are the life-blood of any business, big and small. Everything within a business is geared towards converting new customers and retaining customers. In fact, Shore supports our own customers in custom retention strategies. We utilize the latest analytics and marketing tools to give insights to our customers on how they can win and retain.
With so much work in landing customers, why would I ever fire a customer?
Customers are the fuel to the economical fire. It may seem counterintuitive to get rid of that which keeps food on your table.
Not all customers are created equal.
This is one of the first amendments in business ownership, ahem effective business ownership. When you’re starting out, you need customers. You’ll go to any lengths to have new appointments or bookings. Understandable as it’s just the beginning. Beggars can’t be choosers. Once you solidify your business, have gained traction, and a steady stream of loyal customers, a business owner needs to optimize.
“Optimizing Credit Decision Process: Boosting Profits in the SME Market”, a report from PWC Strategy&, highlights how financial institutions can leaner to turn a profit in an era of decreasing margins.
What do banks have to do me?
While your hair salon or barbershop may not be lending money, here’s the key takeaway from this money-tough industry: customer segmentation. In the report, the authors explained how there are 4 key steps in figuring out whether someone is worth investing in or not. PWC’s recommendation for customer segmentation is the first and most relevant step for a small business owner.
“The first step is particularly important, yet it is one that banks often somehow neglect: segmenting the customer base with specific product offerings. The objective is to break out customers of different sizes and needs, then build the loan approval process around those segments”.
They segment customers based on the institution’s own capabilities and offerings. You’ve probably done the same; you found that different customers have differing needs and desires and you’ve build services to accommodate those particular customers.
While it’s working, it may not be optimal. Perhaps with too many types of customers, your marketing team has no idea who the actual customer is. Or maybe you’re personally burnt out at the end of the day because quite a few customers are incredibly difficult to work with. If you’ve reached a point where you have customers, but you sense “something” is just not working. It may be time to fire customers.
Entrepreneur and author of the “4 Hour Work Week”, Tim Ferriss, did just that when he ran a health supplement company. The Pareto Principle is the theory that 20 percent of your efforts leads to 80 percent of your results. Ferriss examined his own marketing and sales using this principle, theorizing that 80 percent of his sales actually came from 20 percent of his customer base.
The 20 percent customer base is composed of your most loyal customers; they not only give you steady business, but they are easy to work with. You don’t have to spend a lot of time with them nor bicker with them on the phone. In short, they give you constant revenue stream without taking much of your time.
Think of the customer segments that you’ve built your business around. They brought you money in the beginning, but now add complexity and endless headaches to your business. What’s important here is to distinguish these types of customers and add up the total contribution they give to your bottom line. If they take up much of your time, but contribute very little, it’s time to say goodbye. They take valuable energy and time away from the 20 percent that are easy to work and that give you revenue.
How do I “fire” a customer?
Be professional in how you approach this conversation. Explain to them how you see that they would find a better fit elsewhere. Throw in a few recommendations about where they could find similar services or product. (Be careful when giving personal recommendations—you don’t want to give a friend a difficult customer). If you anticipate them being difficult when terminating the relationship, check on your company’s guidelines beforehand. You may want to consult with your company lawyer if some clients become confrontational. When speaking with the person, include payment deadlines and any other tidbits that need to be wrapped up. Be sure to send them all this in an email—always good to have terminations in writing.
It may seem like an uncommon move to make when firing a customer, but you’re saving your company. Employee morale, time, and energy are only a few things that are saved when a business owner stops catering to difficult or unprofitable customers. You’ll have more time and focus to cultivate better relationships with the 20 percent. Any bank would call that an optimal investment.
At Shore, we streamline the entire process of managing a business.From smart appointment booking, digital customer management, and equipping you with marketing tools for customer retention, think of us as your personal assistant in running your company.
We handle the daily, so you can focus on the grind.
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