Why firing customers is a bad move - part 2

First, I'll say there has been a lot of interesting debate going on around some recent comments posted by the CEO of a web hosting company. I saw an email excerpt of a customer being insulted followed by the statement along the lines of "we have enough business that we can pick and choose who we deal with."

Wow. First of all, congratulations to that CEO for having so much business you can afford to insult and fire your customers. But look out for the bus coming your way, because when it runs you over, it isn't going to be pretty. In my humble opinion there is no way that business can sustain their success for the long haul with leadership setting that kind of example.

Look at Dell - they didn't blatantly insult customers - they just got too aggressive with cutting costs and let the quality of support and service slip to where they lost their leadership position (not that it was ever great to begin with). Now Michael Dell is back at the helm trying to right the ship and put their company back on top. What was the first area he decided to address? Customer service.

The web hosting industry is young and raw. After doing this for nearly 10 years, that sounds a little funny but it is still true. Right now, people can get away with a lot and if you mix the right ingredients of bandwidth, disk space, pricing, and automation you can get away with some pretty lousy things and still make money. However, that just isn't the way solid organizations are nurtured, built, and sustained. Trust me, the guys you see insulting customers, proclaiming their own greatness, and callously tossing business aside are not in it for the long haul. Our industry is still made up primarily of technologists who also find themselves running businesses. As our industry matures, I'm sure those guys will find a very lucrative exit for themselves. I'm not knocking their business model or taking away anything from the success they have had, but they're just not positioning themselves to make the transition to the kind of mature organizations we need leading this space.

But back to the topic of "firing customers." This is something that can be almost completely avoided in most organizations with the right training and service philosophy.

Myth 1: Abusive customers demoralize employees and increase turnover.

This may be true for employees feel unsupported by their managers or who don't have the proper management escalation path when things get out of hand. Those really are completely different issues though, aren't they? Don't fall on the "fire difficult customers" strategy as a crutch to avoid dealing with bigger issues at hand. I have taken my share of customer beatings over the years and our management team is glad to do the same when situations escalate. We don't take it personally, do what we can to make the situation right, and our employees know they can lean on their managers when things get rough. I'll repeat, "Don't take it personally." If you take a contrite position, remain calm, and never ever argue with customers, you'll find that most situations are diffused before they ever get too bad. It may be cliche, but it takes two to argue.

Myth 2: Difficult customers are unprofitable and use more support resources than they pay for.

This is true, but it is a fact of life. Pricing pressure in our industry is intense. This is not the customers' fault. I subscribe to the theory of "it all comes out in the wash" and I would encourage you to do the same. Some customers are not going to be profitable, but you made that choice when you decided to charge $1.50 for hosting. You need to be concerned with average cost per account and profitability on a broader scale if you have the chops to compete in the high volume hosting business.

Myth 3: "Problem customers" distract management focus from the strategic goals of the company.

Only if you let them. I find that some amount of customer interaction is good at all levels of the organization because it keeps you grounded. It doesn't need to prevent you from focusing on strategy, and sometimes it can help you identify and fix some glaring issues that you might have otherwise not have recognized. As with anything you spend time on, it's a matter of balance. Most of the time when I call customers, I'm calling to deliver good news. That's because I rely on my very capable staff to fix issues, research problems, and devise solutions so that I can focus on the things I do to keep our company moving. There's no shame in delegating as long as you're not hiding behind your employees.

Myth 4: There are some customers who will never be happy no matter what you do.

Rarely. You're probably just not taking the time to listen to what they really want. People genuinely want to be satisfied with the services they purchase, but some customers' have higher expectations than others. Take the time to listen with an open mind. Sometimes we tend to get indignant when someone calls us out on every little mistake we make. Instead of getting defensive, use it as an opportunity to improve and appreciate the customer for taking the time to complain. It's a fair bet that some other customers were equally dissatisfied but didn't take the time to tell you.

Myth 5: If I fire problem customers, I will have more time to devote to good customers.

I'm sure many hosts would appreciate it if customers came with virtual name tags, neatly categorized in advance. "Unprofitable", "Cheap", "Aggressive", "Has Paranoid Delusions", "Calls our Support Center Drunk" - if only we could know ahead of time, all our problems would be solved. Unfortunately, many people fit into many categories and few are the same on a day to day basis. Some of our best and most loyal customers have fit into some of the worst categories at times. Where do you draw the line? How do you separate the good from the bad? My answer is that you don't. You're much better off being prepared with sound strategies for handling any situation than you are trying to pick and choose who you do business with after they have already signed up for service. If you want to target the high end of the market or a certain type of customer, leave that to your marketing team BEFORE the sale. Once they sign up - treat them all the same - like gold.