Customers: Bad to the Bone?

By | November 4, 2011


By Jennifer Doctor

In this week’s #prodmgmttalk, (on Twitter Mondays at 4 pm pacific) there was a big discussion on what to do with “bad” customers; how did they get to be called “bad”; how do we know they are “bad”; and, what do you do with them. It’s amazing how many points you can make in 140 characters, in a 20 minute timeframe!

While there was enough content to write a book on a “bad” customer, the focus here is to understand why your product even has “bad customers”.

First, let’s get rid of the word “bad”. It implies that something is naughty, and mean, not nice. Our customers, even the ones who demand excessive time and support are not mean. We value our customers, all of them. If you aren’t sure about that, go read the motivational statement on the poster in the break room or on your web site – you say it to others – We value our customers. So, believe it.

Start at the Basic

Once you get past labeling the customer, let’s look at the root cause. Why are they asking so much of us and our resources? Did someone along the way, not necessarily sales, over-promise on delivering functionality or features? Did you find a customer whose problem wasn’t an exact fit to the solution you provide, so much so that you have to change that solution to fit their problem.

Problem/solution misfit is the number one reason for a customer being a drain on your resources. When you have to build everything to their needs, and explain it individually since you don’t have the information disseminated (it is out of scope of the plans you set forth,) and then train the support team on how the features are designed to work – that takes a lot of effort. It pulls you off the path you had set. And, it started because someone along the way – sales, executives, product management – committed that the solution you sell will fix the problem they have.

Another reason why customers become misfits to our solution is simply because we outgrow them, or their problem outgrows us. In this case, see the misfit statement above.

It All Comes Down to a Simple Fact

But, in the end, the main reason why our customers don’t fit is that we didn’t listen to them. We didn’t listen when they first described the problem they had. We didn’t listen when they explained how their internal processes worked. We didn’t listen when they requested more features to solve their problem, and then included that information in the contract. We didn’t listen to the problems that caused broken processes on their back end; rather we focused on how the product was originally designed to work. We didn’t listen.

When we dig the hole with our customer because of our actions, we have two possible courses of correction that are available to us. First, we can bend over backwards and do all that is necessary to make them happy, correcting and adding features and functionality, going onsite to offer additional training, support and service, and promising future discounts and products to “apologize” for the inconvenience we put them through. Or, second, we can simply fire the customer.

Most executives hate the idea of firing a customer. When you tell a customer that you can’t help them any further, it will translate to lost revenue recognition on the books. But, take a fiscal view of the cost of that customer. Most likely, you have already spent more than the value of the contract on support, development and management efforts to try to make them happy, or at least satisfied. Losing revenue is hard, but if you didn’t listen to the customer up front, this is a small price to pay for correcting your own mistake. It’s not a mistake, it’s a learning experience.

There is no such thing as a bad customer. You simply need to understand who is and isn’t a fit for your product; and, put your focus on finding the customers who fit. Your product will be rewarded when that happens.

 

(Please share this on Twitter, LinkedIn and even Google+:  “@jidoctor: Customers: Bad to the Bone? http://wp.me/pXBON-2ZL #prodmktg #prodmgmt #customers”)

 

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19 thoughts on “Customers: Bad to the Bone?

  1. Geoffrey Anderson

    A good whitewashing, and backing away from the term “bad”. But, I will argue that any B2B business who has been around for more than 10 years will have a handful of “misfits”.

    I have one. They were sold our product 8 or 9 years ago, and some “helpful” sales person convinced them that instead of spending $10K on this thing we call “Integration Module”, that they cold instead use our free SMTP interface to connect their (at the time) simple back end system to our product.

    Fast forward to today. They have dozens of complex integrations pumping hundreds of thousands of transactions daily into our system with SMTP, instead of something that would provide the flexibility, and configurability of our Integration module.

    Unfortunately, I can’t even give them this solution, because they have spent far more than $10K over the years abusing the “free” solution, and could never extricate themselves.

    I am sure that the original sales team thought they were doing right by the customer, but 8 years on, they generate more incident calls, and more beta patches than any other customer.

    They keep threatening to go to our competitors at refresh time, but alas, they always renew. Sigh.

    Sorry, had to get that off my chest.

    More seriously, I have been in a business where we had int he past voluntarily tied ourselves to an industry. It drove our roadmaps, our tech dev, and performance improvements to a ridiculous degree. However, sometime around 2002, their needs and the general market place needs diverged, and we chose the highly specialized path. This drove capability and costs well beyond what the vast market needed. In turn, this opened the door for less capable competitors to come in and clean our clock. In the end, we were able to back away, but it was painful to finally tell an industry that while they were important, they can no longer count on us to focus as closely on them. That was a HUGE fight, and had me arguing with the CEO in an ops review (I won, and he called to apologize later).

    In summary, early in a company’s life, there will be temptations to diverge from your core beliefs. Often tied to an attractive revenue propositions that may mean the difference between life and death. Be cautious, as these decisions will often lead to “misfits” and unholy segment focus to the point of hampering your ability to innovate. I am not saying don’t so it, but take those paths with both eyes open, and when they no longer make sense, unravel them.

    Reply
  2. Jennifer Doctor

    Geoff – good comments. and, no, i wasn’t “whitewashing” the bad word. It simply isn’t the focus of the message I wanted to convey. Thanks.

    Reply
  3. Giles Farrow

    Great post.

    I agree Jennifer with avoiding the term “Bad Customer”. There are customers who behave badly, there are people in customer organizations who behave badly but I don’t think it is helpful for product teams to think of any customer as being bad.

    In my experience it is more frequent to see vendors behaving badly. Over-promising, exaggerating, smoke and mirrors, aggressive upsell, poor support…

    Failure to listen to customers is a big part, but fundamentally vendors have to be financially motivated. The need to hit quarterly numbers, sell, sell, “show me the money” drowns out “we value our customer” mission statements.

    Geoffrey raises good points, it’s ironic that the problem was caused by the vendor trying to help the customer by NOT selling them software

    A few final points before I ramble on forever
    - There’s a spectrum of good > bad customers, shades of grey. You’ll always have some “worst” customers
    - Early on, vendors will do almost anything to win a big deal to ensure survival
    - After a few years, the person who sold and the person who bought have probably moved on
    - Vendors have to balance development resources between enhancing for current customers vs new development to win new business

    The solution involves listening to customers, but it should be dialogue. Explaining your roadmap, development priorities, using customer communities to give voice to more customers – not just the loud-mouthed bullies

    Reply
  4. Cindy F. Solomon

    Jennifer, Barry, The Dude, Geoffrey, Saeed, and everyone!

    Thanks for your participation and contribution to the Global Product Management Talk!

    Here is the Recap, Podcast, Transcript and Stanzr Tweets so you can listen to what was actually said and read the twitter stream – very animated discussion! http://bit.ly/uVc4y0

    Please retweet: Recap 10/31 Search For The Best Product Person of 2011 (TBPP) w/ @theproductguy http://bit.ly/uVc4y0 #prodmgmttalk #prodmgmt

    This week: Challenges Of Managing Products With India with Brandi Moore @indiathink Check in here for reminder! http://stanzr.com/vzgnmecn Listen to the pretalk for next week’s event: http://bit.ly/r5pDqh

    Reply
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