Before you fire your unprofitable customer, try this

Editor’s Note: Today’s guest post comes from Mark Hunter of The Sales Hunter.

Some customers are tough to deal with. That comes with the territory. But some customers are literally not worth dealing with – because they cost you more than you make from them. No salesperson is going to intentionally go out and find unprofitable customers, but too often we do end up with a few of these.

We wind up with unprofitable customers not because of the price we’re charging them, but because of the intensity of their demands and requests. You know who I’m talking about: The customer who seems to always want one more thing. No matter how good your service is, they keep asking for something more.
And the more you give, the more they expect. Each time you help them, they come away thinking of another thing. The demands on your time (and the time of other people in your company) quickly turn a once-profitable customer into a money-losing proposition.

Usually this dynamic happens slowly, meaning it gets way out of control before anyone realizes how bad the situation is.

As the salesperson servicing the account, you are often the one in the best position to identify the problem. More than likely, most of the customer’s requests are flowing through you. You then dole these requests out to the respective departments, but collectively all the departments do not see the big picture of everything the customer is demanding.

Once you spot a trend with a customer making multiple service requests, begin detailing the cost involved. A detailed account of what has transpired will help when you and management need to decide how to deal with the customer.

Once you have identified an unprofitable customer, you and your company must decide what is going to be done about the customer.

Often it’s tempting to fire these customers, to free up resources for more profitable business. But a firing is a lose-lose proposition. The customer loses the benefits you offer. You lose immediate cash flow – which must be replaced – and even more important, future opportunities to win more profitable business from this customer.

So do what smart companies do when an employee is underperforming. Before you resort to firing, put the customer on a performance improvement plan.

That starts with some tough love for the customer. Show them why you’re losing money on their business. Customers know you need to make a profit. There’s no need to point fingers. And there’s no need to apologize. Just let the facts speak for themselves.

Then you can offer them two options:

1. “Let’s work together to find a way to reduce the costs of servicing your business.” For example, you can explore ways to reduce the number of requests your buyer makes on you. The buyer may not have realized how many requests were coming at you from his or her organization. Or they may not have realized how much it was costing you to meet their demands. It’s not their fault; nobody ever told them.
2. “Or let’s set a fair price that will allow us to provide the level of service you need.” Nobody’s going to volunteer to pay you more. But it’s surprising how many will agree to it if you insist. After all, they want what you’re selling. And once you’ve explained the costs, they realize it would be hard for them to find it cheaper somewhere else.

There is an unspoken third option, of course. They can take their business elsewhere. But if they do, at least you know you did everything you could to turn this account around. And there’s a good chance they leave with no hard feelings – which may allow you to win their business back, on terms that work for you, somewhere down the road.

Profit is good. Don’t sacrifice it in the name of “good customer service.” Wisdom tells you that the best service is that which satisfies your customer and allows you to make a profit. Your time is best spent on profitable activities. For more information on implementing a price increase, consider this article section of my website.

Mark Hunter, “The Sales Hunter,” is a sales expert who speaks to thousands each year on how to increase their sales profitability. For more information, to receive a free weekly email sales tip, or to read his Sales Motivation Blog, visit www.TheSalesHunter.com. You can also follow him on Twitter, LinkedIn, and Facebook.