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Sunday, 23 October 2016

Customers Who Give You Grief? Like The Dalek, Terminate Them!

Conventional wisdom has it that we must above all else, tend, nurture and cherish our customers because without them we don’t have a business.

All very logical but what happens when our relationship with a customer turns sour?  Do we still try to tend, nurture and cherish them or do we become a little more assertive to bring the relationship back on to an even keel?

One or two examples.   I had a member of my Vistage CEO peer group who had developed a strong link with a large high street retailer who had become perhaps 50% or about £3 million of his turnover.  This made him very vulnerable and the customer knew it.

The consequence was that there was a concerted campaign to make him reduce prices, put punishing procedures in place to make him work to their demands and other even less charming controls on his business.

This all meant that he had to employ four people who were totally dedicated to satisfying the demands, both reasonable and unreasonable, of this retailer and to make things worse, the overall result was that margins almost evaporated.

He brought the issue to a meeting of his Vistage group and he said that he had decided to ditch the customer and reduce the size of the business so that he could retrench and get back into a sensible was of working.

This he did.  He told the customer that he wasn’t prepared to supply him any more to which the startled customer said that he couldn’t do that.

Just try me” he said and within three weeks had terminated supplies.

It took about a further six weeks for the customer to come back and with a newly polished relationship things came back to normal again.

On another occasion a member of the group did much the same thing saying that he was so fed up with dealing with a particular customer he had decided to ditch them and once again it cleared the air so that normal service could resume.

It takes a deal of courage to take this action and a good deal of confidence that nobody else could or would give the same service that they had done.

In the end it is far better to do business with people we like, people who appreciate the service that we give, who don’t take liberties and who don’t use their buying power to make unreasonable demands.

Yet another Vistage member had a business with around 200 customers 190 of which were small wholesalers, the balance being in the main, large retailers.

In this case he decided to bunch all the smaller customers into one group and offer them as a job lot to a very large wholesale customer who accepted with enthusiasm.

The member then concentrated on the few very large businesses and was able to achieve truly remarkable growth as a consequence.  The truth was that the small wholesalers were very demanding, usually placed very small orders, were always complaining and were terrible payers all of which took time and effort to administrate.

The key to all this is to make sure that your customer research is kept up to date, that each customer and sometimes each category is ruthlessly examined on a regular basis and the acid test of gross margin levels is implanted into the day-to-day operation of the business.

It all sounds rather dramatic but in the end it is worth the effort.  Poor customers are usually a very small proportion of the total so why bother to keep them?  It could open the door to new opportunities.

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