Sometimes You Have To Fire A Customer

Published: December 10, 2010 - by Dan Holohan

Categories: The Business of Heating

paretochart1

 

The 80/20 Principle

I got involved with the Internet in 1996, when we built our first Web site. I wasn't sure the Internet would take off in those days. Brilliant, eh?

Our first site had the marvelous name of DanHolohan.com, which was fine if you knew my name. Trouble was, not many people did and that was a problem. With the second site, I decided to call it HeatingHelp.com because I had learned that it's better to use the name to describe what the site does rather than who's behind it. People are more interested in what's in for them, right? Of course, Amazon, Yahoo!, Google, Zappos and others disagreed with me, but what do they know?

When the new site launched, I came across a just-published book called, Permission Marketing. Its author, Seth Godin, wrote about a new way to go to market by asking for people's permission to talk to them, rather than just bombarding them with unsolicited information. This made so much sense to me back then, and it still does.

Seth wrote about building a tribe, where the goal is not to lead, but to become a member of the one that coalesces around you. You learn from the tribe, and they, in turn, support you. Some of the people in the tribe become your customers, and those are the ones upon whom you need to focus most of your attention. Be there for them.

I read all of Seth's other books and started following his blog each day. If you're interested in this business beyond the turning of wrenches, you should subscribe to his blog. You can't beat the price, and if you like what he has to say, become his customer by buying his books.

He recently sent me this, which made me think of you because you're also building a tribe (whether or not you know it).

Train your customers

Yes, you can train them. By rewarding some behaviors over others, by keeping some promises not others, by having some expectations instead of others, you get the audience you deserve. Some things you can train customers to do:

* Be respectful
* Be patient
* Keep their satisfaction to themselves
* Be selfish
* Be focused on a superstar
* Demand personal service
* Be calm
* Never settle for the current iteration
* Be cheap
* Embrace acceptance
* Spread the word
* Expect pampering
* Demand free
* Be eager to switch brands to save a buck
* Value and honor long-term loyalty
* Be skeptical

The customers you fire and those you pay attention to all send signals to the rest of the group.

Quite a curriculum, isn't it? And everyone in your company gets to be a trainer of your customers. I think the most relevant line in that brief blog post is that you get the audience you deserve. Oh, and that line at the end about firing customers is also pretty important. Here's why:

In 1906, Italian economist, Vilfredo Pareto noticed that 20 percent of the population of Italy owned 80 percent of the land. He also noticed that 20 percent of the peapods in his garden contained 80 percent of the peas. He looked around some more and kept noticing the same thing. He called it Pareto's Principle, and it plays a part in your life, especially during these wacky times.

Since 1906, marketers have looked to Pareto's Principle (a.k.a. the 80/20 rule) and concluded that about 80 percent of the business is coming from 20 percent of those folks we call customers. You have the good customers and the bad customers and if you fired the bad ones (probably 80 percent of the total), you're probably going to keep doing as much business as you're doing right now, and with a lot less aggravation. Think about it. How much time do you spend spinning wheels, bending over to help customers who never actually give you any business? Those "customers" sure know how to demand things, though, don't they?

When I worked for the rep in New York, they had me doing a lot of plan-and-spec work. I'd drive to a mechanical contractor's office and do equipment take-offs from the plans of whatever jobs they were bidding. Then I'd spend hours working up a lump-sum price. I'd deliver the bill of materials and the price and then I'd wait to see who won the job.

What I learned over a bunch of years was that the mechanical contractors who demanded the most from me, going in and afterward, never once gave me an order. They'd want me to help with redesign, and they'd want me to troubleshoot jobs that they were currently doing, all with the promise that if I scratched their back, they'd scratch mine. But I never got their business. They'd just use my price to beat my competitor over the head, and then give that guy the order.

They'd call me again for the next job, and we'd do this all over again because I was a New York idiot.

That's when I heard about Pareto's Principle. I began to realize that my company would lose nothing by firing some of these knuckleheads. I also came to realize that I was training them (as Seth Godin says) in how to better abuse my company and me.

So this is what I did. The next time one of them called with his demands, I told him that he could get a price from the other guy. I wasn't interested in quoting him on the job. I was busy taking care of my customers. This guy, being a true New Yorker, screamed and cursed me and told me that that I had to quote him, and that if I didn't he would never give me any business. Ever again. Never!

Which is exactly what he had been doing all along.

So what did I have to lose?

I mean, except him.

Which would be a blessing.

As it worked out, I was able to give even better service to the customers who were buying from us. We built our tribe around them, and we all became happier people.

With business the way it's been this past year, more people out there are interested only in price. That's a shame but we both know that it's true. In this environment, you need to think about tribes, and the training of customers, and you need to recognize Pareto's Principle as something that is as real as it ever was. If you focus most of your attention on training the 20 percent of your customers who are working with you and giving you business you're going to be better off. Find ways to do more for them. As Seth writes, train them to focus on a superstar. That's you. You're a superstar because you're devoting nearly all your time to those who understand and appreciate what you bring to the table.

As Seth writes, train them to value and honor long-term loyalty because that's what you're delivering to them. You'll be there for them whenever they call. You'll be there if there if there's a problem. You'll be there years from now because you have no intention of going out of business.

Focus on your best customers. Get their permission to serve them. Train them to appreciate and value you. Build a tribe from those good people. Fire the knuckleheads and don't look back.