In my early career, I never thought I could fire a customer. I felt like if a customer wanted to be a customer, I should let them. However, I have changed my opinion over the years. Now, I believe that the customer relationship goes both ways and customers that are not treating your organization or employees well should get sacked.
In my CX consultancy, I have refused to work with some organizations. I skipped their project because I didn’t feel like they were serious, and, in my experience, if an organization isn’t serious about their customer experience program, then it won’t be successful. I didn’t want my organization to be associated with a failure that was because of lack of commitment to the concept.
We discussed firing customers in a recent podcast. I was inspired by Frederick Reichheld’s article, “Firing a Bad Customer in 2021.” Reichheld is the author of many books on customer loyalty and invented the Net Promoter Score (NPS).
He believes that taking feedback from the wrong customers makes frontline employees feel more alienated from the system of the NPS. Your frontline employees, Reichheld argues, should be empowered to choose the customers from whom they receive feedback.
The power of the 20 percent should not be extended to the 80 percent
You will remember the 80/20 rule which essentially says that 80 percent of a given product originates from 20 percent of the participants. Many distributions are skewed such that a small proportion of people generate the most revenue or the most profit or the most content.
The same is true for your customers. A small group of customers (20 percent) generates most of your revenue or most of your profit (80 percent).
The idea of firing your customers means looking at the other end of the distribution, within the 80 percent not making most of your revenue. In some cases, there are even some at the very end of the continuum who might cost you money.
Whatever small amount of revenue they generate, these customers take up more employee time, complain more, and turn off other potential customers for you. You should recognize that the revenue they generate is not worth the costs you spend on servicing them and fire your customers if that's the right business move.
"All customers are important, but there are some customers that are more important than others."
I spent 20 years of my life working in a large telecommunications company. We found that many customers we had defined as our best customers were in truth the ones who shouted the loudest. These squeaky wheels were the most visible customers, but maybe not our best ones. We also discovered that when they were squeaking, we would add resources to manage their accounts.
However, we never removed the resources, even after we had resolved their issue. We ended up where we had customers generating decent revenue, but nowhere near the revenue they should to warrant the resources that we had devoted to the management of the account. I suspect this problem was not unique to my organization.
Also, in an Orwellian, Animal Farm way, all customers are important, but there are some customers that are more important than others.
Holding customers accountable
I was talking with the general manager of the Mandarin Oriental, and he told the group that he had just fired a customer. I was surprised, so I asked what happened. He explained that the customer was abusing one of his employees and he wasn’t prepared to accept that abuse towards the team. I thought the idea that he wouldn’t accept abuse towards his staff was brilliant.
There is no excuse for customers behaving in an uncivil manner towards the employee. You might have heard something like, “the customer is king.” We all know that kings were not always civil to their subjects. This idea of firing the customer pushes back on that and says customers need to be held responsible for their behavior as well.
One example of an organization that handles this well is Uber. If you are a user of the ride-share platform, then you know that the customer writes a review of the driver. However, the driver also reviews the customer. If a customer gets a one-star review, that serves as a warning to others.
"There is no excuse for customers behaving in an uncivil manner towards the employee."
This example demonstrates one of the non-financial metrics: geniality. Some customers might be terribly profitable but serving them is miserable. In extreme cases, it could be because they are abusive, but in other cases, they might be exhausting. When a customer is lacking in geniality, it is worth determining if having that account is worth it.
Organizations should fire customers who are abusive to their employees. It’s good for employees and, ultimately, good for customers who hopefully learn their lesson about treating people with respect.
However, it doesn’t have to be that extreme, either. You can also reallocate your resources. You might spend your time working with customers that are more pleasant. You are not sacking customers at that point, but you are optimizing your resources for similar business outcomes and employee welfare. The squeaky wheel, in this case, wouldn’t always get the grease.
Using data to understand customer behavior
Some profitable accounts are high margin and low maintenance. Your customer attention should be saved for your most profitable accounts and if those are also the ones that are the best to work with, then you really need to keep them happy.
Amazon understands this idea of prioritizing customers based on behavior. Amazon has enough data about their customers that they have created profiles of people. While Amazon understands that returns are part of the cost of doing business, they know who returns excessively (Guess what? It follows the 80/20 rule!) Amazon has fired customers because of too many returns.
As we move into the digital space, people should understand that their behavior follows them. For example, Uber banned customers for bad behavior and then Lyft, a rival ride-share service, banned those same customers. Also, airlines have been known to share data about passengers that were banned from future flights on their airlines.
How to fire your customers
Firing customers can be a painful thing. Also, if you don’t do it properly, it can result in some bad PR, which isn’t ideal. However, there are ways to handle it to the best possible outcome:
Be open and honest about why you are firing the customer
Transparency will help address a challenging situation. Then, be consistent in your policy. In other words, make no exceptions, because if you make exceptions, it casts a suspicious light on your motives, which is the last thing you need. People may not like it or want to hear it, but if you calmly reiterate what the issue is and why you're making this decision, you are managing it as best you can.
Recognize that we all have a physicalism bias
A physicalism bias is the idea that what's in front of us gets the most attention. When it comes to revenue or profits, these factors are salient and difficult to ignore. However, you should also bear in mind the hidden costs, like how many resources you employ to gain that revenue, which are not as noticeable relative to the actual dollars coming into the bank account.
I would encourage people to take a deeper dive into accounting to include not only what is easy to articulate and enumerate, but also some of the stuff that's more difficult, like the emotional costs of interacting with a customer. If there is abuse or if employees cringe every time they see that account pop up on the caller ID, it may be time to reconsider the importance of that revenue generated.
Try to fix things before firing a customer
It is also crucial to give the offending customer feedback and offer a solution that would resolve the issue before you fire them. Talking through the issue could save the account (and the revenue).
Think of it like soccer. First, a player gets a yellow card, then a red, and after that they are sent off the field. A similar type of gradient should apply, with steps that you need to go through before you end up firing the customer.
Develop an ideal type of customer to target
Consider the type of customer that you do want and the type of customer that you don't want. If not, you will accept anybody, which could lead to higher costs and decreased margin. Your ideal customers should have more than revenue; they should be profitable. Customers that aren’t the right fit for your product or service are going to end up costing you more than they are worth.
My bank in the UK recently fired a lot of customers. They decided they would only accept customers that made a specific threshold of salary amount. I suspect they realized that customers that didn’t fit this criteria were not profitable, so they decided to act on it.
In conclusion: Sometimes hanging on to customers is not worth it
As I said, you should fire a few customers sometimes. My journey to this point has spanned 40 years. In the beginning, I would have thought that firing customers was madness.
However, at this side of my career, and knowing what I know now, I would smack that silly, earlier version of myself, and explain that hanging on to customers that use up your resources, eat up your margin, and abuse your relationship are not worth it. Hanging on to them is the madness. These are the types of customers you hope go to the competition. In fact, in some cases, you might want to make that introductory call.
What have you done with difficult customer relationships? Have you ever "fired" troublesome customers? Let us know in the comments below.