Steps to Management Success – Step 84: The Customer Is Not Always Right

Written By Rick Frishman Published April 2nd, 2010

STEP EIGHTY-FOUR

The Customer Is Not Always Right

Other rules in this book emphasize the importance of serving your customers—but not all customers are equal. And those customers that are unprofitable can flat out put you out of business.

WHAT IT MEANS: A profitable customer is the right customer. But its important to distinguish between short term and long term profitability, and to consider the effect that working with one customer may have on other potential customers. Just ask Best Buy. In a Wall Street Journal cover story, Best Buy’s CEO said he wants to separate the “angels” among his 1.5 million daily customers from the “devils.” The devils are its worst customers—the ones who buy products, apply for rebates, then return the items; or who present rock-bottom price quotes from hole-in-the-wall Internet merchants, demanding Best Buy make good on its lowest-price promise; and so on and so on . . . ad nauseam.

Best Buy believes that up to 20 percent of its customers are not profitable for them, so they want to focus on the people who buy products without waiting for markdowns or rebates. Your business has “devils” too, and you don’t want to waste time with these types. They’ll negotiate you to the bone. Just like they did with the supplier before you, and the one they’ll try it with after you.

ACTION PLAN: Develop measures that will help identify your customer devils. Flag them in your database. And empower your sales and customer service people to politely but firmly limit or refuse service. By all means, go the extra mile and proactively delight your best customers, but your customer devils are just a drag on your staff and your profits—weed them out!

EVEN BETTER: Most managers have heard of the 80–20 rule—that 80 percent of your business comes from 20 percent of your customers. The same probably applies to your customer service problems. Periodically review your sales and service policies that may be subject to abuse and try to plug the loopholes. Establish a system that can help prevent customer devils from taking repeated advantage of you.

(Excerpted from: 10 Clowns Don’t Make a Circus. . . and 249 Other Critical Management Success Strategies by Steven Schragis and Rick Frishman)


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