Impossible Customer? Channel Your Inner Donald Trump

I spent time recently with several independent dealers of a very well-known industrial equipment manufacturer.  Our conversation turned to “difficult” customers, and one of the participants talked about his dealership’s refusal to do business with one of the largest buyers of the equipment in the US.  This dealership had decided that they were tired of that customer’s outsized discount demands, difficult terms and conditions, and the need for service and support resources greater than any other customer.  They had reached a point where the business was not worth it.  I think it’s a decision that more businesses need to make today. 

A lot of businesses I talk to are  finding some of their customers becoming unreasonably demanding on key issues like price, service levels, and contract terms.   Unfortunately, the economy has actually strengthened the resolve of these difficult customers.  Like the schoolyard bully that gets emboldened with every kid that forks over their lunch money, many large buyers of goods and services feel like they have the upper hand over their suppliers.  Granting concessions to these customers can be a slippery slope, and to mix metaphors – it’s hard to get the toothpaste back in the tube.  Some small businesses are fighting back, according to a recent Wall Street Journal article, but it has to go farther than that.  

The best customer/supplier relationships are partnerships.  But when the customer gains control over the supplier, it’s time to exit the relationship.   That customer’s business becomes bad business - and they need to be fired.   This advice often goes against everything business managers have learned.  Countless magazine articles and business books focus on how expensive it is to obtain new customers, and extol the virtues of keeping customers for life.  Sales and delivery leaders in organizations are urged to do virtually anything to please the customer – particularly a large one.  When you layer on the effect of the economic downturn, it gets even harder to pull the trigger on these troublesome customers.  But at some point, problem customers become like problem employees – they have to go.   

There are no straightforward guidelines to follow.   But you need to answer a few questions to see if it is time to fire that difficult customer:

• Do you really know the profits generated from this difficult customer, including ALL the resources and associated costs needed to service them?
• Have you factored in the negative cash flow impact of these resource hogging, high maintenance, and often intentionally slow paying customers? 
• Do all those resources expended on the difficult customers take resources away from your more profitable customers?
• Is there an impact from bad customers on the morale and productivity of your employees?
• Are you sure that if you push back on their demands that they will take the business elsewhere?

It’s not easy – but it’s often necessary.  If you get to this point with a customer, channel your inner Donald Trump and let them know, “You’re fired!”