Identify (and Lose) Bad Customers

2 August, 2021 by
Identify (and Lose) Bad Customers
James Huang

We all know bad customers are unpleasant to deal with. The consequences of bad customers can reach into other aspects of your business, too.

They contribute to churn when they don’t listen to you and don’t realize value from your offering. They take up more than their share of resources in terms of time and money. And wreck your metrics across so many categories: customer health, customer satisfaction, accounts receivable, and more.

The best customers reward us through revenue, referrals, and loyalty. Unfortunately, toxic customers hinder your ability to serve profitable customers. And that means bad news for everyone.

That’s why it’s so important to identify and deal with dissatisfied customers. We’ve outlined some common types of unfit customers and we’ll show you how to spot them, and what to do next.

Most bad customers:

  • Don’t Pay On-Time (Or Ever)

  • Don’t Pay Enough (Or Don’t Want To Pay)

  • Have Unclear or Changing Demands

  • Want ALL the Attention

  • Aren’t Available

  • Aren’t Honest

  • Are Abusive or Threaten Your Staff

  • Make Unreasonable Demands

  • Complain to Anyone Who Will Listen

  • Don’t Listen to You

What should you do with bad customers?

Assess Their Value

The costs of customer acquisition are certainly higher than the costs of customer retention. So the question you need to ask is, “What is the value of keeping this customer?”

Here are some key things to consider:

Their cost versus their profit. Here’s where you’re going to want solid data. Strong ticketing systems can easily pull up useful metrics like how many tickets a customer generates, how many touchpoints are required, and their invoice history. If they’re costing you more than you’re paying, that’s a red flag.

If your bad customer is a high-profile customer, then they may be worth the headaches they cause. Make sure you’re ready to deal with any loss of prestige or social media consequences.

What are the consequences of losing this client? You may be in a situation where the risk is too great.

Have a Real Conversation

Communication is key. Any change in your relationship is going to have to start with talking to the customer. The goal of this conversation is to move your relationship in the direction you’ve chosen when you assessed the customer value.

Be transparent and honest about your concerns.

Manage their expectations. Clearly explain what you can and can’t do for them. If you’re keeping them as a client, then make sure they know what to expect going forward.

Get on the same page. Make sure you understand their needs and that they align with yours.

Fire Them

Sometimes the right answer is to walk away.

Be direct. With a clear and direct explanation, you will minimize the likelihood of a misunderstanding.

Be decisive. Prior to the call, you made your decision. There should be nothing to sway your decision.

Be kind. After all, even the worst customers deserve to be treated with respect. Demonstrate empathy and offer a graceful transition plan out of your business.

Don’t Acquire Bad Customers to Begin With!

As the list above suggests, many bad customer relationships stem from mismatches and poor communication and unclear expectations. So, you want customers who are a great fit.

Here are ways to attract better customers who admire your company:

  • Develop a detailed customer persona to help you identify your best customers.

  • Verify all marketing claims for accuracy on your website, blog, social media, and emails.

  • During the sales process, confirm there's a real demand for your product. Just because someone seems like a good fit at first glance doesn’t mean they are ready to implement it.

  • Ensure all expectations and contracts are crystal-clear from the outset.

  • Price your services appropriately. High-touch services generally require more financial investment from clients. 

Conclusion

Bad customers may be a fact of life, but there’s plenty you can do to keep a bad experience with them from ruining everything. By identifying those bad apples, you can deal with them effectively.

In many cases, it's not the customer's fault per se, but the company shares responsibility in their experience along the way. Recognise and prune unfit customers before they harm your reputation. Likewise, nurture and wow your existing customers so they can't help but tell others about their experience.

Identify (and Lose) Bad Customers
James Huang
2 August, 2021
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