Q. My company has a customer who is simply horrible. Can you fire a customer? If so, what is the best way to do it?
A. The short answer to your first question is yes, you can choose to stop serving a customer because he or she is behaving badly. However, you cannot stop serving a customer because he or she is a member of a protected class (e.g., minority, female, disabled, etc.). Not only is it morally wrong, it’s illegal. Deciding not to serve a customer is a very serious decision that should not be taken lightly. We suggest four steps.
1. First, fix the problem – Customers are the lifeblood of business. Without them, the doors close. Customers are difficult to attract and replacing those that leave is expensive. If there is a problem with a customer, a wise businessperson assumes that the problem is the fault of his or her company and goes to extraordinary lengths to resolve the issue. Resolving the issue and saving a profitable customer relationship is a win for the company and the customer. If at all possible, fix the problem.
Pepper Laughon, a successful business owner who took Richmond Cold Storage from a fledgling company to a thriving enterprise, told us that he had one very important rule; he was the only person in the company who could tell a customer “no.” Customers were almost never told “no.” The point is that deciding to not serve a customer is a very serious decision that should be made only at the most senior levels. Nevertheless, there are rare occasions when the customer simply cannot be satisfied — drastic action may be required.
2. Do the numbers – Before deciding to fire a customer, ensure that you understand the financial implications. Consider not only the variable contribution from that account, but also the cost of replacing the customer, and the cost of the former customer sharing negative experiences with others. A satisfied customer will tell one person, while an unhappy customer will tell seven people. Small businesses cannot afford dissatisfied customers.
3. Consider all of the costs – It’s also true that the cost of serving a bad customer can go beyond dollars and cents. For example, a customer who is abusive to your employees can demoralize your staff. Further, if the abuse is severe enough and/or goes on over a long period of time, your company may be liable for damages if you don’t act to resolve the problem.
4. Don’t burn bridges – If you do reach the difficult decision to stop serving a customer, end the relationship as pleasantly as possible. Don’t say that you are ending the relationship because the customer is horrible. It’s better to explain that, while you are very sorry, your company is not geared to meet the customer’s expectations and that his or her needs can be better served by someone else. This will reduce the number and severity of negative comments and leaves the door open for a future relationship if the situation changes.
Deciding to fire a customer is a serious decision. It should happen very, very infrequently. However, if the time does come, following these tips will result in the best possible outcome.