How to Identify Customers not Worth Keeping

firing-customers
A sale is a sale is a sale.” The toy department manager at Best Products repeated this saying as if it were a spell that would miraculously change him from mediocre employee to super-manager. Periodically, he would change it to “A customer is a customer is a customer.” If asked to explain, he would respond that any sale was better than no sale and any customer was better than no customer. Anyone who dared question his view of the retail world was delegated to the warehouse. It was a good thing that I liked warehouses because I spent a lot of time there.

To say that we didn’t see eye to eye is an understatement. I understood the need to make sales and treat all customers well regardless of the purchase amount. I didn’t understand the “all customers are equal” mentality. The value of a customer is directly related to the contribution made to the bottom line over a lifetime. Our different views about customer relations led to the Star Wars incident. Years later, it is still one of my most vivid customer care memories.

A little background information may be helpful before I continue the story of the Star Wars incident. Technically I worked in the jewelry department but anyone who knows me knows that I don’t idle well. Repeatedly polishing a clean jewelry counter while waiting for customers is enough to push me over the edge. When things were slow in jewelry and the toy department needed help, I always volunteered. I suspect that the manager there saw my assistance as a combination blessing and curse.

Remember the “why” stage that children go through? I never outgrew it. “Why?” and “How?” are my favorite questions. Sometimes they keep me awake at night. The jewelry department manager always answered my questions and listened to my thoughts. The same questions annoyed the toy department manager. When he declared that all customers were equal, I couldn’t get my mind around it. His “because they are” responses to my questions were less than satisfying and set the stage for the Star Wars incident.

Star Wars action figures were in high demand. Someone in manufacturing had the bright idea that people would buy an army of stormtroopers to go with the main characters. The figures arrived in packs of 24 pieces consisting of Luke Skywalker, Hans Solo, Princess Leia, Chewbacca, C-3PO, R2-D2, Ben “Obi-Wan” Kenobi, Darth Vader and sixteen stormtroopers. People didn’t buy as expected. They wanted one of each of the main characters and a couple of stormtroopers. This left a lot of stormtroopers on the shelf and unhappy customers at the counter.

Some customers would show up when a truck was scheduled to arrive in hopes of snagging an elusive main character. One customer was particularly diligent. He came every day to check on the inventory. This particular customer was a regular in the jewelry department spending hundreds of dollars during a down economy. Time was running out for him to get a Princess Leia for his daughter for Christmas. While making a jewelry purchase, he asked me if I could help him get the action figure. I made no promises but agreed to try.

The next truck had the toys. I placed a Princess Leia in the jewelry department, told my manager, and called the gentleman. He was so excited. Later that day, he told my manager how appreciative he was for the special service. My manager told the toy manager and then it was on. The toy manager wanted me fired immediately for providing special service to a loyal customer. His reasoning was that all customers were equal. Preferential care upset the balance of things. No one corrected him. The firing didn’t happen but I became disillusioned with the company and resigned after a few months.

All customers are not equal. Some contribute to the company’s success. Others are an expense that needs to be eliminated. Yes, this is harsh and very different from the “customer is always right” mentality. Sometimes, customer and company are not a good fit. When this happens, the relationship needs to be severed. Knowing how to choose which customers to keep and which to let go is key to a solid company foundation.

Letting customers go is scary, especially in a tough economy and digital world. What if they tell everyone? What if sales drop and you need the cash flow? What if you make a mistake? The “what if’s” will drive you crazy. Instead of going there, think about this – the customers who cost more to keep than they contribute are pulling your company down. Do you really want it to sink because you’re afraid that you might alienate a few people? Choosing to invest your marketing and service dollars in the people who contribute to corporate success is better. And, just to calm your nerves a bit, most of the customers you let go will never know it.

How do you decide which customers to let go? Direct marketers used to do it by recency. People who hadn’t ordered in twelve months would start to be phased out of the mailing cycle. Technically, these customers were being fired but they didn’t know it. Today, more analysis is needed. Seasonal customers can get caught in the purge trap if recency is the only consideration. We have access to more data than ever before. Identifying people who cost more than they contribute is much easier. There are three reasons to let people go:

  1. Marketing cost is greater than contribution. These customers rarely order and/or have a low average order. Marketing costs are higher than the revenue generated. Before removing them from the marketing cycle, try using less expensive marketing tools. Email is relatively inexpensive and can be targeted well.
  2. Service cost is greater than contribution. Some people order so they can return the items to order again. This may not be their real motivation but it seems that way. When service calls and events exceed the norm, review the customers to determine the wisdom in continuing the relationships. In most cases, you can simply phase them out of the marketing cycle. Occasionally, you will have to fire them.
  3. Customers abuse policies and employees. No one should have to work in a hostile environment. There are always a few people who feel entitled and will demand over the top service. If they don’t receive it, the bearer of bad news (aka your employees) will be subjected to a temper tantrum that would put any two year old to shame. This is cause for immediate termination. People that repeatedly abuse policies need to go too.

Letting customers go is part of a sound management strategy. It is never easy and shouldn’t be done frivolously. When done well, resources are freed to use for building better relationships with the people who matter most. Everyone wins.

To learn more about how you can better manage customer relationships, email Debra at dellis@wilsonellisconsulting.com.



31 Ways to Supercharge Your Email Marketing

How to Get More Customers, Sales, and Profits without Spending a Fortune


The guide is filled with actionable tips that increase sales, improve retention, and reduce costs. We are so confident they work we offer a 365 day money back guarantee.


Learn More




{ 0 comments… add one }

Leave a Comment

Real Time Web Analytics