Should you ever fire a customer?

Linda LaitalaBusiness, ManagementLeave a Comment

Some truths are universal.

•The sun rises in the east
•The truth is the truth even if no one believes it
•Nature weeds out the stupid   
•Giving money to a good cause makes you feel better than if you’d spent it on yourself
•Not all customers are created equal
That last truth is especially accurate if you take the time to make a list of all your customers and grade them as “A”, “B” or “C”.

Your “A” customers contribute to the bottom line.  “B” customers aren’t particularly profitable, but they keep you busy during dry spells.  “C” customers are the ones you might be better off without.

If you want to improve your company’s net profit you have to eliminate the bloodsuckers or bottom feeders – those “C” customers; the ones who ask for special treatment and show their gratitude by paying you in 60 or 90 days.  Firing a customer is not something most business owners relish; it goes against our sales code of conduct.  What can you do to weed out “C” customers so you have more resources to spend on “A” and “B” Customers?

Here are some suggestions: 1.Quit being their bank. Convert the slow payers to cash on delivery (COD).
2.Raise your price.  Give them your list or top price.  Will some of them leave?  Absolutely. Give them a map to your competitors place.  Let them be someone else’s worst customers.  The funny ones are the customers who stay despite being on COD and raising prices.  (These should make you re-think your pricing strategy.)
3.If your company doesn’t require a minimum order size – implement one.
4.Do not order special product for “C” customers.  They can buy what you have off the shelf or what is easily produced.
5.Finally, quit spending sales dollars on “C” customers.  Stop calling on them.  Remove commissions on these customers and make them house accounts.  By removing the commissions, you remove the favorite word in the sales vocabulary used to describe an under-performing customer – potential.

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