Should You Fire Your Worst Customers?

August 21, 2014

Putting the axe to incoming revenue may seem like a bad idea, but the truth is the costs of maintaining bad customers and ensuring that they are happy can grossly outweigh the benefits of keeping them around.

Is firing your worst customers actually a good idea? In many instances, the answer is an unequivocal yes. Yes, turning away revenue can hurt, but the truth of the matter is there are always costs associated with onboarding and servicing customers, and the ones who are unhappy or who aren’t a good fit in the first place can quickly become more trouble than they’re worth. Add on top of that the risk of a bad/disgruntled customer detracting from your brand, and the decision to part ways is usually an easy one.

Do You Know Who Your Worst Customers Are?

The problem is that while it’s never an easy choice to cut the cord, it can be an especially difficult call to make for early-stage companies, who are still actively building their brand and trying to optimize their customer acquisition process. To make matters worse, early-stage companies also rarely track the costs of maintaining a customer (or even a cohort of customers), and by neglecting to do so they lose out on data that can be extremely valuable and illuminating. For example, it is not uncommon to find that 10% of your customers account for 70% – 90% of your customer service costs, even in an early-stage business.
Many companies decide to hold off in investing in customer service tracking tools because they are short-sighted and do not see immediate benefits from it. But putting it off can often come back to haunt them. Sometimes not knowing the cost of maintaining a particular customer group can lead a company to think they are more valuable than they actually are. It can even lead to them steering their go-to-market and customer success strategies in misinformed and misguided directions. It can be an extremely costly mistake.

The Usual Suspects

Often, some of the worst customers turn out to be early adopters of a company’s products who get accustomed to heavy customization and expect this type of special treatment to go on indefinitely. Of course, the reality is that as the company scales out this special treatment is no longer going to be there for them. Trying to manage that expectation is a difficult thing to do. In many instances, it can lead to a situation where that customer is more trouble and risk than they are worth.

Softening the Blow

Let’s be honest, most customers would prefer not to have direct contact with a service provider on a regular basis. If they are, they’re probably just as frustrated as you are that this is taking up all their time. The reality is they may not be best suited for your service, and your relationship may be holding both of you back.
Explaining this, of course, can be difficult. No matter how reasonably or eloquently you put it, the customer will not always appreciate your rationale immediately. They may even be caught off guard with being dropped from your service. But once they find a better suited provider of a competitive service it’s unlikely they’ll hold any grudges. In fact, in the best case scenarios your honesty will result in respect. They will walk away thinking very highly of your brand, and could even become a promoter down the road.

So How Can These Missteps Be Avoided?

First and foremost, adopt a low intensity customer tracking tool or process that allows you to at the very least to develop a sense of time spent working with specific customer segments. This can be as simple as tagging customer service call-ins. There is no sense in getting carried away with high-end systems.

Bottom Line

Having successful and happy customers is the very best marketing resource you have. The only way to reach that point is by ensuring you are selecting customers that are likely to succeed in the first place, and by investing in their path to success. Then the next step is to actively empower them to promote your brand. In my next post, I will share some ideas on how to mobilize your best customers.
In the meantime, download our free eBook guide on customer segmentation to start zeroing in on your best customers — and finding more prospects like them.


Photo by: Thomas’s Pics

Marketing Manager, Pricing Strategy

<strong>Brandon Hickie</strong> is Marketing Manager, Pricing Strategy at <a href="">LinkedIn</a>. He previously worked at OpenView as Marketing Insights Manager. Prior to OpenView Brandon was an Associate in the competition practice at Charles River Associates where he focused on merger strategy, merger regulatory review, and antitrust litigation.