What can we do to manage unprofitable customer?
Foundation of any successful business lies on satisfied customers, so managing them effectively is utterly important. There is no doubt that dealing with customers’ demands is difficult. But, there are few customers that are just ‘waste of time’ and referred as unprofitable customers since dealing with them costs companies more than the business they provide.
Could you answer immediately, how many unprofitable customers you have? Um..2, 3 – you probably don’t know. Your company is probably profitable and you are not distracted by an unprofitable customer. But, there are chances that you might have them and you should know how to manage them.
How to deal with such customers ?? Well, the right way to manage unprofitable customers are:
1. Sort Your Customers by Revenue
There are some customers which provide you revenue and some don’t. You have to be very clear about this. Increasing the number of customers is a great way to increase your revenue. But, you have to be clear with who provide you more benefit and sort your customers accordingly. Then, look at the breakdown of the costs of serving each of them.
Many don’t even know which part of their company is more profitable, although it is very easy to find out.
2.Look out what brings in business and what keeps it away
Before you start any business, you notice other businesses strategy and their success rates. But instead, you should focus on the customer which will give you best chance to be successful. No matter which services you provide, you need to have a clear group of individuals who would see a value added from your product or service.
Your focus on which customers are bringing in the business and which keeping it away should be managed properly.
3.Make them pay for everything they get
Make your customer pay for whatever they purchase. Suppose, a customer buys a product online and wants special delivery options, packaging or features, all of this is fine as long as they pay for it.
Small businesses often are so focused on maintaining customer relationships that they ignore a basic principle: “Your price must cover the cost”.
Customers are very important for your growth and also necessary to make them pay whatever they purchase. Businesses have found that the customers will stay with them despite price increases from 50% to 70% if you know the technique of how to manage them.
For example, In a restaurant, customer order any food. You can say “We would be happy to serve you, but there’s an extra cost for providing that service”.
This will create an impact and your customer will remain.
4.Negotiate the contract
“I like your product, but the price of the product is way out of line. We’re used to paying half that much”.
Now, this wasn’t supposed to happen. Right?? You have invested a lot of time in making your product and if the customers say such things, it demotivates you and you don’t want to compromise with the cost. This kind of dilemma is not new. If you are doing a business it is necessary to work both the ways i.e. on customers side and on businessman side.
A competitor who finds a creative way to satisfy both the parties can steal the business.
If nothing of the above works, try this:
5.Try getting customers to fire themselves
As of now, you are clear that Customers are everything for a business to run. It is not easy to fire unprofitable customers themselves. One way to do this is to offer different levels of service and allot your unprofitable customers to the lowest level. Give them phone-based support but do not ignore them.
These things will let your customers fire themselves.
Now surely this is an inconvenient truth for many of those who would believe ‘the customer is always right’.
There are some ‘don’ts’ which should not come between you and your unprofitable customers.
- Do not let your emotions drive you
The first important thing you have to take a note on that do not let your emotion drive you i.e. use data to understand your unprofitable customer. It is possible that a customer has been with you for long and so the idea of disinvestment seems a bit frightful.
Use data to understand that for how many times they were profitable and unprofitable.
- Do not raise product Prices
Do not raise your product prices as a makeup for losses you incurred because of unprofitable customers. This might make your present customers unhappy. The hike in prices would be viewed as injustice to your profitable customer and this may lead them unsatisfied.
- Do not doubt the Top-line earnings and Bottom-line Profits
Make a thorough analysis of top line earnings and bottom line profits. It is essential to understand whether the large investment is making profits and contributing to the bottom-line.
It is important to focus on customers profitable to your organization and the ones who give you a headache. Avoid these mistakes and manage your organization well.
After this analysis, your company can know unnecessary baggage and needless expenses.