When the customer is flat-out wrong

Joanna L. Krotz writes about small-business marketing and management issues. She is the co-author of the "Microsoft Small Business Kit" and runs Muse2Muse Productions, a New York City-based custom publisher.

By Joanna L. Krotz

Worn out trying to please an impossible client? Blame it on Harry Gordon Selfridge.

In 1906, Selfridge purchased a site in London, upon which he built the famous store that bears his name and thrives today. Selfridges opened doors in 1909, when women were beginning to enjoy the fruits of emancipation by wandering unescorted around the city of London.

A canny marketer, Selfridge promoted the radical notion of shopping for pleasure rather than necessity. His fashion-forward shop adopted the slogan now heard round the globe: "The customer is always right."

That century-old wisdom flourishes today, even while businesses run on real-time sales forecasts, preferred-customer databases, time-management applications and activity-based costing software — all of which can calculate to the penny how much each transaction costs you.

Is every customer always right? Oh yeah. Except when they cross a line that you need to draw.

Drawing the line

In any season, jettisoning customers is a last resort and a tough call.

"There's an insane obsession with customer service," says Alan Weiss at Summit Consulting, near Providence, R.I. "If businesses stopped focusing only on layoffs and customer service and took a tight, disciplined look, they'd improve performance and profits."

Weiss sees three categories of customers who often deserve a walk:

Here's how a range of businesses called it quits with customers:

No excuses. Caf� in the Park is tucked into a corner of the building that houses the Museum of Photographic Arts in San Diego's Balboa Park. Owner Susan Gilbert says, "I teach a strong customer service ethic."

One day, remembers Gilbert, a woman customer "was first verbally abusive and then began to reach over the counter." The caf� is only accessible from a hallway; there's no exit or street entrance. So Sara, the manager, had no escape. As Sara politely attempted to calm the customer, she became enraged. "She reached across and tugged at Sara's hair to such a degree that she lifted Sara off the ground," Gilbert says. At that point, another employee called a guard and the scuffle died down, "leaving Sara shaken and in need of chiropractic adjustments," says Gilbert.

Bottom line? Caf� in the Park has new rules. The staff gets to exercise judgment and refuse service.

"Management shouldn't force employees to take abuse," says John Connor, president of Quality Assessment Mystery Shoppers, an Austin, Texas-based firm that performs incognito customer service evaluations for businesses. Such encounters can't just be chalked up to human nature. It's also a lesson to management.

Consistently creating unreasonable expectations for customers and demands on employees will leave staff frustrated and open to abusive complaints. That goes for lawyers or waiters. The advice is twofold: When a customer is irate or upset, says Connor, "Empathize with him. Allow your staff to say, 'I'm not a punching bag. I'm trying to help and you're being abusive.' "

On the other hand, don't set unreasonable service policies. Give employees the authority to make the call with customers.

Firing the customer. Laura Michaud at The Michaud Group, a Chicago-area consultant, urges owners to create customer snapshots. "Pull apart expenses and find out how promptly they pay, how much customers are costing in support services, complaints, favors or returns, training or special compensation," she says. "Invest in the things that bring you customers and loyalty. When the investment turns into costs so high that it eats revenues, let go."

Michaud, formerly vice president of sales and marketing for Beltone Electronics, a medical device manufacturer, learned from experience that quantifying customer relations is the smart route to growth. At Beltone, Michaud says, one Florida hearing aid retailer slipped into financial trouble and had scant cash flow.

"Their receivables went way up," she says. "It was a sizable customer so we tried to help them stay alive." For instance, Beltone's regional manager lent a hand by visiting the shop to introduce products, to run seminars and to try to gain more market share. Increasingly untrained, employees were causing customer complaints for the manufacturer, yet the supplier kept helping. "We tried everything we could for a year," Michaud says. "We suggested changes, and helped draft a strategic plan."

Eventually, Beltone exercised its contract's 30-day exit clause. "Six months later, the retailer went bankrupt," Michaud says.

So take care when you extend credit to a customer who might turn round. Generally, says Michaud, if the customer is costing 10% more than his revenue, move on. But they may be bringing in more revenue. Consider:

Does the customer refer other business? How much?

Does the customer confer prestige or contacts that offer you opportunities?

Are you planning to expand into an area or niche that will boost revenues from that customer?

Second-guessing syndrome. Most service firms have met the type: the client who hires your expertise only to keep questioning it. Motivational speaker Jim Cathcart, author of "Relationship Selling: The Key to Getting and Keeping Customers," tells of an industrial manufacturer who hired him to address its sales convention. Typically, Cathcart says, he researches 10 to 28 hours to tailor speeches to client industries and needs.

Soon after the assignment, the client turned nervous, requesting several phone conferences to preview the speech, a written copy and time to edit and approve it, among other requirements.

"I give 60 speeches a year and I've never written down a speech word for word in advance," says Cathcart, who became bemused as well as exasperated. After trying to assuage the client's nerves to no avail, Cathcart backed off. "I said, 'If you need such reassurance that I'll do a good job, I'm not your guy.' "

He suggested raising the fee to compensate for the extra work or referring the client to another speaker. At once, like magic, says Cathcart, the process reversed and objections dropped away.

"You often need to teach people how to buy from you," he says. "The client deserves the benefit of the doubt. Where the transaction is everything, relationships don't matter. Yet it's the relationship that's the valuable asset."

However counterintuitive it may seem, firing customers can actually boost profits. Pruning your client base of low-margin, high-demand and time-consuming customers lets sales and service staff totally focus on customers who matter — loyal, repeat buyers, worthy new customers and lucrative acquisition.