Firing the customer is something taught in business schools and often mentioned as an approach for small companies to get rid of problem customers. The subject came up again recently in a WSJ article that reported on small businesses, who, despite the recession, are deciding to shed their high-maintenance and unprofitable customers.
It’s a popular slogan: “Sometimes you just have to fire the customer.” Is this a risky business during a recession? At best it’s unpleasant for both customer and supplier, despite the cathartic feeling the firer gets from the dismissal.
Conventional wisdom has been that the customer is always right. This slogan should be interpreted that customer should always be given the benefit of the doubt and treated with respect. But sometimes the respect doesn’t cut both ways or the customer is becoming a financial burden rather than revenue generator.
Here are seven reasons why a supplier may need to end its relationship with a customer:
- The customer is a low percentage of your business but takes up much more time than your higher-revenue customers, impacting your ability to manage your resources and serve other customers.
- The customer’s business is or is becoming increasingly unprofitable.
- The customer is much larger than your company and expects you to fund new initiatives without any guaranteed upside.
- The customer is unhappy with your company and has become impossible to satisfy, causing you to expend resources without any return on investment.
- The customer continues to extend its payments to you without any willingness even to communicate about the situation. This reason is usually an additional factor along with others, rather than a standalone factor.
- The customer is abusive to you or your employees and creates disruptive and wasteful strife.
- Your efforts to improve a poor situation with a customer are ignored or unsuccessful.
A two-way flow of respectful and productive communication can go a long way toward improving a situation. Dismissing a customer is not a decision to be made impulsively and should be done carefully and respectfully, despite the impulse for catharsis. However, a supplier may sometimes need to end a customer relationship for self-preservation, both financial and psychic.