Thursday, September 23, 2010

Customer Service for Dummies

Sometimes you just need to let a customer go. If a client is abusive to staff, or demanding but you're unable to satisfy or reason with them, you may have to show them the door.

But this article goes deeper. It can be valuable to periodically evaluate your customer base and jettison the ones that are no longer a fit. Many companies routinely rid themselves of their "D" class unprofitable customers. It is a valuable strategic practice that will not harm customer relationships provided you do it correctly.

In the last column I shared a compensation plan that creates top sales performers. Now I want to explain a way to provide Ingenious Customer Service.

Excluding outright abuse from an out-of-control client, decide whether to terminate only after you've had a chance to reflect and cool down. Tell the client you need to check on something and will tell them later how (not if) you will solve their problem. Don't stall them, just find a reason to get back to them. Then make the decision when you're rational.

The Wrong Way to Fire Customers

Unfortunately companies often terminate clients at the wrong time, stating inflexible policies as ultimatums or offering tactless suggestions during a fevered disagreement, and this can sully a good reputation. Handled improperly, disagreements can also cause former customers to feel betrayed and act vindictively. Read about the Rule of 200 to learn the ramifications of a heated exchange. This is where excellent companies differ, proactively heading off this behavior before it begins.

The Right Way to Fire Customers

When you've chosen to discharge clients, the best practice is to allow them to fire themselves. How do you do this? By progressively removing value from the business relationship.

In an earlier column I shared a technique to handle a customer complaint. You'll remember I suggested you can avoid ill will by putting the decision in the customer's hands. In this same way, put the decision to terminate the business relationship in their hands.

A business relationship is like a playground teeter-totter.  As the supplier, you sit on one side and the customer sits on the other. You load your side with goods and services and the client loads his side with money. In this way the teeter balances.

If the totter becomes angled and you notice that you are dragging the ground, how do you right the teeter? Either by lightening your load (removing services) or increasing the customer's (increasing payment.)

In the same way, gradually make the business relationship less valuable for them and more valuable for you.  For instance, when you raise prices with the Grandfather Discount, exclude them from the offer.

Of course you will continue to provide the customary excellent service you give everyone, but gradually remove enough value from them while increasing the value to you so that ultimately the teeter-totter will right itself.  Or the customer will get off the teeter. Simply put, he'll terminate himself.

Will he leave immediately?  Maybe not - and this method won't leave you with the satisfying feeling of instant closure. But even when a customer is incredibly difficult to deal with, the decision to terminate should be made rationally, not emotionally.

Will he leave upset?  No.  Not if you put the choice to quit in his hands and he exercises it. You can even recommend an alternate vendor if you wish. And if he does choose to get upset, he won't have anything concrete with which to slander you.


Case Study: the Dance Studio

As a teenager I took dance lessons at the local studio. We middle class college students loved it because it was inexpensive and near the University. As a result of word of mouth of the students, the business grew rapidly. However, the owners soon discovered the college students were on a fixed budget and chose to attend the less expensive group classes. Hence, they were "D" class clients compared to the "A" and "B" class clients who could shell out for expensive private lessons.

The owners chose to cultivate a more affluent demographic by moving the studio to a wealthier part of town. The new owners found themselves in a dilemma: the D-lister's word of mouth had built their reputation and they didn't want to risk damaging it. So they implemented policies that caused us to jettison ourselves.

They handled it the right way. They didn't ask us to leave. But over time they made the services so inconvenient that we no longer found attending worth the trouble. The owners began decreasing the frequency of the group lessons we attended, from three times a week originally to twice a week, then weekly, and finally every other week. The owners justified the reductions by claiming that the regular classes had filled the available time slots and it was all they were able to provide.

The class winnowed itself down and eventually we all left. But there was no animosity because we had made the choice. And had we been miffed, what could we say? That the studio had become so popular that we felt shut out? We had nothing concrete with which any of us might damage their reputation. The studio flourished after we left with a new clientele, and the owners enjoyed an unblemished name.

Next week I'll share a way to use a variation of this technique to hand off customers and vendors to junior staff, furthering your ability to delegate and create a turn-key organization. You can even pass off close, long term relationships without risking losing clients. Done properly, this method will free up a lot of your time and allow your organization to grow rapidly. And later we'll continue discussing Ingenious Sales Management, developing a training program that nurtures top performers who stay with you for life. It's coming up next week. Until then,

profitable business All! 

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