Are you working for free or worse still, effectively paying your customers for the privilege of buying your products and services?
Stopping the bleeding often adds 50-100% to bottom line profits, which enables you to invest for growth and serve all customers better. We all know that we have customers who are costing us more than they’re worth, yet rarely do I see a company with a proactive plan to address the vampire customers who are bleeding them dry. Instead, I repeatedly hear from business leaders that they don’t want to fire those customers, because they provide essential volume. And they’re right… sort of… but they’re going about this exactly the wrong way. When you indiscriminately fire customers and have to spread fixed costs over an ever-smaller number of customers, they ALL eventually become unprofitable. That’s the conventional accounting-based approach that leads to a lot of faulty decision making.
Instead, take a look at the behaviors and attitudes that are making your customers unprofitable, and you’ll find 5 more effective ways to restore unprofitable customers back to break even or better. You’re probably in for a few surprises, because most often I see that unprofitable customers are due to self-inflicted wounds on the part of the company that can be easily fixed! For example, how often do you extend bargain-basement pricing yet bend over backwards on service for a ‘blue chip’ customer? I’m all for competitive pricing and great service… but only when its win-win, otherwise its simply not sustainable and someone’s in for a big disappointment. There are also situations where its customer-inflicted… such as the customer that you end up financing at your expense because they don’t pay on time, and you reinforce your payment terms because you’re afraid to lose them if you do. These examples suggest that different strategies are required to get vampire customers back on track and regain a healthy bottom line.
We all know someone who’s been divorced, and we all know that rarely was the fault all on one side. Its the same with vampire customers – over time, bad behaviors creep into the relationship on both sides, and its often as simple as having a “we love you but this has to work for both of us” conversation.
How do YOU deal with your vampire customers?