9 Ways to Identify a Bad Customer

Not all customers are kings. Although there are plenty of service gurus out there that will tell you that you should go out of your way to satisfy - even delight - each and every customer, anyone with a bit of business experience will know that in some cases that is just impossible.

Some people are just unfair and are looking to exploit your services. Even more, to keep your service team effective, you should know how to recognize these people.

We are a service company, that’s why we mostly write posts about how to best satisfy your customers. It thus might seem strange to some of you that we are now writing a post about 'bad' customers. However, the truth is that you can actually improve your service by timely identifying this group of 'bad' customers and taking action.

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There’s a rule in business that you should 'fire' 10% of your customers every year. It will free your resources to serve other, more profitable, clients. Working with some clients costs you money, decreases your staff’s morale and affects your relationships with other clients. Not to mention that it can cost you your peace of mind. For most businesses, around 80% of the income comes from 20% of the clients. Eliminating the 10% worst clients allows you to focus more energy on the top 20% that deserves it.

So how do you recognize a ‘bad’ customer?

High Contact Frequency

If a customer contacts you with a frequency far above the average, devouring too much of your team's time, he might not be worth keeping.

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Of course this doesn’t mean that anyone reaching out with requests is potentially a bad customer. But if you have someone who constantly reaches out to you with questions that could have been answered by simply going through your website or knowledge base, if a customer is obviously too lazy to think for himself, he deserves the label of 'bad customer'.

Swaps Vendors in Your Industry and Boasts About It

A customer who openly admits to having changed vendors in the industry on regular basis, and because of details or small price differences, is very unlikely material for a loyal client. Some clients constantly look for a better deal and will leave you the minute they find one.

Your Staff Complains About Them

Your employees are the first ones feeling the pressure from bad customers. They are also the first to show signs of problems. Learn to listen and trust them. If you hear them constantly complain about a particular person, you should take a closer look to see whether you’re dealing with a bad customer.

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Abusive To Your Staff

Similarly, a customer who doesn’t treat your staff with respect doesn’t deserve your time and effort. Whether it’s disrespecting your staff’s work, being bossy or even rude and abusive, you might want to consider letting the customer go. A customer with no manners is no king .

This point is nicely illustrated by the story of the Restaurant Chef who had to deal with two unfair customers in his restaurant in Cambridge, Massachusetts. After being totally unfair and rude, these two individuals even threatened to write a bad review on Yelp. The response by the restaurant chef was quite priceless .

Payment Issues

Refusing to pay, trying to postpone the payment with silly excuses or avoiding any communication are sure-fire signs of a problem client.

You shouldn’t however confuse such clients with those who have a genuine reason for delaying a payment. They however usually come to you to explain the situation and offer some ways to solve the problem.

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Tends to Add or Change Scope off Work During Project

That’s a common symptom in service-based industries. A customer keeps on adding requests to a project or changing their mind about what they want. It forces you to keep starting from scratch, costs you money and takes up time you wanted to devote to other clients and projects.

Constantly Unavailable

If you constantly cannot get hold of a client and he doesn't respond to your messages, there might be a problem. Of course the customer might be ill, busy, or on holiday. However if the problem persists, it’s a situation you don’t want your people to be in.

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Tries To Game The System

It’s only natural that you provide various guarantees, promises and return policies. But a customer who orders from you and returns the item as faulty a day before the return period expires and then proceeds to order it again is clearly tying to game the system.

Or one who constantly claims that an order was lost in transit and demands a replacement to be sent, only to be undelivered again. Some customers will take a chance at your policies to try and get stuff for free. Even though they place orders, they end up costing you money and aren’t worth keeping.

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The 4P's Matrix

Sometimes you might not be able to clearly identify bad customers. Yet, you know that you should let go of some of them, even if only to make way for other opportunities. In such situation, use the 4P’s matrix to assess your client base.

Note: The below is a system I've been using in my business for over a decade. I don’t remember who invented it, I learned it from a business coach I worked with at a time.

The system is simple - grade each customer on 4 criteria:

Price. What price do they pay you? Do they pay a full price or constantly ask for discounts? Or perhaps you on boarded them via a highly reduced price and thus the rate is lower than others?

Prospect. What is the prospect of getting more business from them?

Promotion. Is having them good for promotion? Are they a well-known brand that looks good on your clients list?

Pain. Are they easy or a pain to work with to work with? Do their projects run smoothly or do they cause delays with unreasonable demands, conflicts and so on?

Create a chart and plot all clients against those criteria on it. You should very quickly see potential clients to drop. Sure, it’s not an exhaustive system. But even this simple exercise can help you identify clients you should take a closer look at. Also, it allows you to identify your most cherishable customers.

So far so good, you now have a framework to identify good and bad customers. But how do you actually get rid of the bad ones? That’s not as easy as it might sound. Sure, you could send out a mean email, but with all the social media outlets this could do real damage to your brand. Let’s say you collected a list of bad customers, what do you do?

I. Communicate this list with your front-end staff

Share the list and explain your staff that the company would prefer to lose them, however without making them your enemies. Then provide your staff with a list of tactics they could deploy, containing the following points.

II. Explain the situation

This is a simple one, but it has to be done with care. In the first request, explain as politely as possible that with the current demands, it is not possible for you to serve the customer. Best is to set up a standard reply for this.

III. Suggest your competition

If price is their main concern, maybe they should become aware of your cheaper competition. Or if they are looking for a fuller service or more features, suggest your more expensive competitors. Make the customer realise that there is a tradeoff between price and quality and bless your competitors with this customer.

IV. Radically reduce the service effort

If you’re dealing with a hopeless customer, add a flag that answers to his inquiries shouldn’t take longer than a few minutes. Be very brief and forget the pleasantries. In time the customer will get the message.

V. Stop serving the customer.

In time, there is just no point in communicating any longer. Instead of growing the tensions even further, stop answering the inquiries. In the end the customer will give up and leave.

Of course, these are extreme measures. They should only be applied to your most extreme customers. Instead of aiming for the 10%, start by simply identifying and labelling the bad customers you run into. And remember, a good customer service deserves a good customer.