In most relationships, when one party is no longer benefiting from that relationship, he or she usually moves on. So why are we so hesitant to do the same with customers? Most companies have a slew of marginally profitable – or even unprofitable – customers, but cringe at the idea of ending a relationship with them. According to Mark Heisler and Suzanne Baldino Jones, authors of From CellMates to SoulMates: Integrating Sales and Service (Virtualbookworm.com, 2002), roughly 40 to 60 percent of most organizations’ customers produce only 5 percent of the profits. Companies that can “move on” with those relationships and devote more of their resources to top-tier clients will become much more profitable. Here are Heisler and Jones’s suggestions for moving on with your bottom-rung customers:
1. Do your homework. Conduct a detailed analysis of your “bottom 5 percent,” or Tier C, customer data that goes beyond raw numbers. B2B companies should look at “C” level customers that are associated with more profitable customers, such as divisions of parent companies. B2C companies should identify “household” relationships, or individuals with the same address. This kind of research “attempts to minimize potentially embarrassing situations with good customers whom you want to keep,” say Heisler and Jones.
2. Conduct internal reviews. Once the customer data has been analyzed, give the list to the sales and service teams to review. Both, inevitably, will identify customer relationships that should not be disturbed and they’ll provide legitimate reasons for maintaining those relationships.
3. Start with the no-brainers. “We have found that a company can eliminate 10 to 15 percent of its customer base quickly, with very little pain, fanfare or risk to either the company or the customer,” say the authors.
4. Determine how customers will be notified and how you’ll handle the feedback. Be honest, clear and concise and lay out the business rationale for ending the relationship. Make sure you give customers plenty of notice so they have time to react, and be sure to include a telephone number for questions or comments. Before you send out notifications, have a plan in place for fielding questions, making exceptions and so on.
5. Repeat this process annually. “Trust us,” say Heisler and Jones. “This is a liberating experience. Assuming the company is taking care of business, this ‘C’ problem will get smaller and smaller.”