Not all customers are good customers! Strategic Marketing will avoid and deter bad customers.
Customers can be bad customers for all sorts of reasons. They can be unprofitable or troublesome. They can waste your time or cause stress. Some interfere too much. Some aren’t worthy of including in your portfolio. Others pay late, or never.
Some customers are simply more trouble than they’re worth. In time, with experience, we learn to recognise such customers upfront and avoid them. But we can only avoid them if we have a choice. Businesses that are struggling financially don’t have this choice and are then forced to take any kind of customer, even the bad ones. I don’t want this for my clients, so we need to organise the business in a better way. By devising the correct marketing strategy we can attract the right kind of customers and deter the wrong ones. Then we can afford to say no to the wrong kind of customers because we have an abundant choice of good ones. That’s the position we want to be in, but we need to work to get there. It’s not just about effort and perseverance; it’s about smart thinking. We need to think strategically about our business, its formula, and its carefully selected market segments.
Don’t simply accept any customer!
We need to say NO to the wrong kind of customers – the customers we would decide not to work with if we could pick and choose. This creates space for the right kind of customers. We can then work with customers that are profitable and a pleasure to serve: customers and projects that add positively to our portfolio and enhance our reputation. At this point, it just gets better and better! It’s an upward spiral with profits, reputation and satisfaction reinforcing each other. But first we need to avoid the opposite danger, the downward spiral. This is where a business is so desperate for customers that they will serve any ‘monkey with a cheque book’.
Businesses in this position are desperate for cash and literally cannot afford to say no. Consequently they accept business from customers they can’t satisfy. They might accept a contract even if it’s unprofitable – as a result the business loses more money. And maybe they then do work which is not of a high quality, jeopardising their reputation. It gets worse and worse. What a nightmare.
My analysis of enterprises in this position is that they have a flawed business formula, and no effective marketing strategy. Sometimes, the underlying cause is that they are competing on price, offering services or goods that many rivals also offer. In other words, they have no speciality: they can’t dominate any niche. They are drowning and grasping at straws. The only way out of this desperate position is to find something they can offer that rivals can’t. They need to focus on market segments that want their speciality – and devise a marketing strategy based on competitive advantage. Without this, the business will fail.
I do understand that in the early stages of a business entrepreneurs can find themselves in the difficult situation where the business doesn’t yet have a reputation and cash is tight. They need to devise a strategy, using a combination of strategic thinking and experimentation, and quickly. This difficult period should be regarded as a phase of market research – many successful businesses look back on this period as a time when they were quickly learning how to survive. They were exploring how to compete. From the lessons learned they derived a business strategy. Sadly, others will look back on this period as a horrible stressful time that led to business failure.
A bad customer isn’t a bad person; they are simply not the right kind of customer for our business because they don’t fit our marketing strategy. We don’t have to be rude in saying no to the wrong kind of customer. In fact they might be the right kind of customer for another business with a different strategy. By referring them to another business that can serve their needs better than we can results in a win-win-win.
The difference between success and failure is a matter of marketing strategy. It’s not about perseverance, creativity, or operational marketing flair.
Without an effective marketing strategy the enterprise is doomed to failure.
The wrong customers will harm your business by paying too little, too late or not at all. Bad customers can also waste your time and cause stress. We have to quickly find good customers so we can lose the bad ones. Finding good customers is a product of your business formula and marketing strategy.
What to do next
* Reflect on unprofitable customers you have dealt with and analyse the circumstances in which you dealt with them. Were you desperate for cash? Were you competing on price instead of a speciality? Decide what you need to do to be able to say NO to bad customers in the future.
* List five unprofitable projects or customers. Write down what went wrong with each of them and how you will avoid the same problem in the future.
This is an extract from David’s marketing book ‘Chase One Rabbit: Strategic Marketing for Business Success. 63 Tips, Techniques and Tales for Creative Entrepreneurs’.
Read this and 62 more inspiring and practical marketing techniques on your smartphone by downloading this strategic marketing book as an eBook. It is also available as a paperback and as an Audiobook. This highly-acclaimed marketing book is also available in Spanish and French.