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Companies let go of troublesome employees. Is it ever a good idea to apply the same practice to troublesome customers?

You mean, is the customer really always right?

The obvious answer is yes. You can’t build a business without trying to satisfy every customer, even cranky, annoying, or unreasonable ones. Customers are like relatives. You can’t pick them, so you better learn to love them.
But—and this is not an insubstantial but—there are some circumstances where that old adage about customer supremacy can actually be destructive, and it makes sense to say no or even good-bye.

The first is easy: It’s when a customer’s demand for price destroys your profitability, or worse, creates industry pricing chaos. That’s when you have to hold the line and dump the customer even if it drives your salespeople crazy. The second circumstance is similarly unsustainable: It’s when a customer demands a one-off product that sends your r&d group in the wrong direction, away from your own strategy and financial goals. Again, this is a case where your salespeople might be hollering for support but where the long-term diversion of resources is a killer. Unless it is an exceedingly profitable customer, you have to just say no.

The third circumstance is more nuanced. It’s when a customer disrespects your people. Now, sometimes your big customers—the market-share monsters—can act a little obnoxious. They own you, and they know it. So with them, you may need to endure some rudeness or outrageous demands as part of the cost of doing business.

It’s different when the customer doing the berating is not your meal ticket but just a jerk. Then, your first line of defense is to switch the salesperson on the account, putting in someone with tougher skin and the mettle to say: “Hey, this has to stop.” If that fails after a good try, it’s time to walk.

Bottom line, we’re not recommending that anyone ditch their “The Customer Is Always Right” plaque.
We’d just add a little asterisk.

This question and answer originally appeared in Business Week magazine on February 19, 2007.
Scott Whittle
8/10/2008 9:42 AM

I've had to endure a few of these and I'll say add my $.02. First off, I disagree that you should ever "fire" the customer. What you can do change the terms of engagement...higher costs, surcharges, no more free extras, tighten up paper work, eliminate sales commissions. In other words: make it worth *your* while. You only have upside here. First, if the customer accepts your terms you keep the customer (and associated margin) and everyone on the team is happier than before. Second, you send signals to the sales team to get in and manage the customer and here are some parameters to do that. They'll start doing it next time they see the same patterns emerging knowing they have management support. Third, if you start upsetting what makes the customer comfortable (mainly price) then you will likely get the attention of higher-ups within the customer's management ranks. Perhaps an over-reaching purchasing person needs a change-out. Fourth, if the customer bails, then the end came anyway but you let THEM walk away. This is important for competitive reasons as well as managing the future as people from your customer's employment will eventually move to other organizations within your industry. In any event, the sales team needs to nut-up and manage the customer relationship upfront and not let it get to this point to begin with. R&D and feature requests are easy too. We manufacture technology products and everyone has their own "special feature" request. The problem is that there tends to be a lack of commitment on actual purchasing of equipment. Sometimes the feature is in our strategic line, sometimes not. Here is what I do: 1) Non-Recurring Engineering fees up front. The magnitude is related to effort, opportunity cost, where it fits in the product line, sale opportunity, customer experience, and a whole lot of "feel". 2) Sometimes they complain, but you know have given a tool to sales to really vet out the opportunity and bring it close. For example: "Place that non-cancellable order for 10,000 pcs and the NRE goes away" 3) If that won't work, then we put it back on the customer to perform. I will amortize the NRE and pay it back to the customer on a per-piece basis on actual sales. The amounts are weighted so that that the first shipments have little NRE payback. What happens, after the math works out, is that the customer has to take the quantities it promised to get full pay back. It gives them way to get 100% whole on the deal, but they have to make it happen.

 
 
     
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