Dealing With Unprofitable Customers

While it can be tempting to think that every customer is valuable, some are more valuable than others, and others just aren’t worth the effort they require to retain. Whether it’s because of consistently late payments, excessive support requests, or simply a divergent way of doing business, sometimes a company and a customer just aren’t the right fit for each other. Customer divestment has become more common in the last decade, with a Harvard Business Review study¬†from 2005-2006 indicating that 85% of executives in certain sectors had already undertaken divestment with some customers.

Talk to the customer directly about the behavior.

Some customers will respond well to a simple discussion of the issues. Indicate to the customer which behaviors have made interactions with the company less profitable, and discuss alternatives. Sometimes, customers can be taught to behave differently, or use the service in more economical ways. Approach the customer the same way you would an employee who consistently performs poorly. If there is an alternative service that would fit the customer’s needs and lead to a more profitable relationship, consider forwarding that idea at such a meeting as well.

Consider ways to encourage customers to leave of their own volition.

Though you shouldn’t actively withhold service, consider moving customers you would like to break up with to lower positions in queues or otherwise lowering the priority and quality of their service. While too much of this, or being too obvious about it, can damage your credibility and lead to poor reviews, being subtle about it can lead the customer to stop doing business with you without feeling as though there were any real problems on your end.

Be direct and personal when terminating a business relationship.

Though cutting a customer off can be painful for all parties involved, approaching it with maturity and forthrightness can take much of the sting out of it. 90% of those the Harvard Business Review interviewed about B2B divestment indicated they used direct communication channels to discuss the decision with the clients. By making it clear that the decision to terminate the business relationship is, indeed, strictly business, it is possible to reduce the negative feelings associated with terminating the relationship and avoid damaging word-of-mouth from the terminated customer or business.

Help the customer through the transition.

By giving a customer fair warning about divestment or a change in service, you can make the change easier and put fears or suspicions to rest. Customers will often respond positively to courtesies such as waiving termination fees or giving them a few months to find an alternative provider for the services your company currently provides.

Consider selling unprofitable accounts to partners or competitors.

Be honest about what you’re selling when you consider this solution, but if you can find a buyer for unprofitable accounts, give it some thought. A competitor may have more resources allocated to dealing with the behavior that’s rendering the account unprofitable for your own organization, or have a culture that more closely matches the customer’s. The short-term monetary boost from this sort of activity can take a little of the sting out of cutting off a customer.

What do you think?

Though it can be painful to consider that some accounts just aren’t worth keeping around, part of maintaining good relationships in any sector of life is avoiding bad relationships. A bad relationship won’t lead to good sales; even a high-quality CRM system and solid sales work won’t salvage something that’s broken at a deeper level. If you’ve had a rough time coaxing a customer into profitability, tell us your story in the comments.

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