Breaking Up with Bad Customers: The Secret to Long-Term Success. The principle that “the customer is always right” is still held onto tightly by many. But in reality, not all customers are worth keeping. Sometimes, firing a customer—politely parting ways—is the best decision for a company. At first glance, this might seem counterintuitive to a businessperson’s instinct to gain more customers and revenue. However, cutting ties with problematic customers can actually boost long-term success and improve employee morale.
Breaking Up with Bad Customers: The Secret to Long-Term Success
Why Should You Cut Ties?
There are several reasons why a company might need to end a relationship with a customer. The first is unrealistic expectations. Some customers expect results far beyond what was initially agreed upon or demand services that are outside the company’s expertise. These customers can drain a company’s resources. The customer ends up disappointed, and the company ends up frustrated. If this continues, the company’s reputation might take a hit, especially if the annoying customer starts spreading their dissatisfaction publicly.
Another big issue is payment. Cash flow is like the lifeblood of a company. If a customer consistently pays late or needs constant reminders to settle their bills, it can burden the company’s operations. The time and energy spent chasing payments could be better spent elsewhere. Frequent late payments are a red flag that the customer’s financial situation might be unstable, increasing the risk of unpaid debts.
Rude customer behavior is also a strong reason to let them go. Remember, everyone in the company is a human being who deserves respect. If a customer is consistently rude, abusive, or makes unreasonable demands in an inappropriate manner, it can create an unhealthy work environment. The psychological toll of dealing with such customers can lead to burnout, decreased job satisfaction, and even high employee turnover.
Value misalignment can also play a role. Over time, a company’s business might evolve, or the customer’s needs might change in ways that create a values mismatch. Maybe the company has shifted its focus to sustainable practices, but the customer insists on using non-sustainable materials. Or perhaps the customer’s business practices clash with the company’s ethical standards (even if they didn’t before). In such cases, continuing the relationship can damage the brand’s identity and compromise the company’s values.
Lastly, the disproportionate use of resources compared to the revenue generated can be a reason to end the relationship. Sometimes, a company has to spend a lot of time, money, and human resources to serve a particular customer, but the results are minimal. Meanwhile, there might be other customers with greater potential. This is especially true if the customer’s demands go beyond the original agreement and they’re unwilling to pay for additional services.
It’s Like Defusing a Bomb
Getting rid of problematic customers isn’t something you can do casually. It’s like defusing a bomb—you need to be careful if you don’t want it to blow up in your face. Being aggressive toward an annoying customer is counterproductive. The company could be accused of mistreating customers, especially in the age of social media.
So what’s the right approach? First, make sure the company isn’t breaking any rules. If there’s a written agreement between the company and the customer, review all contracts or applicable agreements. Having a clear understanding of the legal position will help the company handle the situation with more confidence.
Next, communicate directly but respectfully and thoughtfully. Explain why the relationship is no longer mutually beneficial. Focus on the facts—like late payments, scope creep, or values misalignment—rather than personal feelings. Express appreciation for their business and, if possible, offer a referral to another provider who might be a better fit for their needs.
Depending on the nature of the business and the customer, the company might offer a transition period. This could include completing pending work or providing support during the handover to a new service provider. Offering a smooth transition shows the company’s commitment to professionalism and can help prevent negative feelings.
After parting ways with a customer, conduct an evaluation. Use the unpleasant experience to refine the customer selection process and set better standards for future relationships.
On this topic of letting go of problematic customers, there’s an interesting story from Zappos, the online shoe and clothing retailer based in Las Vegas, Nevada, USA, which is now a subsidiary of Amazon. Zappos has built a reputation for outstanding customer service and a generous return policy. The company, founded in 1999, offers free returns for up to 365 days, encouraging customers to try products risk-free. However, this policy has been abused by a small fraction of customers who excessively return items or engage in fraudulent behavior.
Zappos decided to fire customers who abused their return policy. They identified customers with extremely high return rates or those suspected of fraudulent activities and took action by no longer accepting returns from those customers or by closing their accounts altogether.
This decision allowed Zappos to maintain the integrity of their return policy for the vast majority of customers who use it responsibly. By eliminating the small fraction of abusers, Zappos protected their margins and ensured that their customer service remained sustainable.
By firing customers who abused the return policy, Zappos was able to continue offering exceptional service to their main customer base without incurring excessive costs. This preserved their reputation as a top-notch service provider.
Zappos used data analytics to identify patterns of abuse, ensuring that the decision to fire customers was based on concrete evidence, thus reducing the risk of unfairly targeting customers.
Zappos communicated clearly with the affected customers, explaining the reasons for their actions. This transparency helped to minimize potential backlash and maintain customer trust.
Category: Marketing & Branding
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#unrealistic expectation
#customer behavior
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