How to Spot Bad Customers – and How to Deal with Them

How to Handle Bad Customers

We all know bad customers are unpleasant to deal with. The consequences of bad customers can reach into other aspects of your business, too.

They contribute to churn when they don’t listen to you and don’t realize value from your offering. They take up more than their share of resources in terms of time and money. And wreck your metrics across so many categories: customer health, customer satisfaction, accounts receivable, and more.

The best customers reward us through revenue, referrals, and loyalty. Unfortunately, toxic customers hinder your ability to serve profitable customers. And that means bad news for everyone.

That’s why it’s so important to identify and deal with dissatisfied customers. We’ve outlined some common types of unfit customers and we’ll show you how to spot them, and what to do next.

10 Ways to Identify a Bad Customer

1) They Don’t Pay On-Time (Or Ever)

You’re in business to make money. And customers that don’t pay don’t make you any money. In fact, they cost money.

Unpaid invoices reduce your cash flow. Is cash flow or profit is more important to a business? The answer is both.

According to Investopedia, a business may see a profit every month, but its money is tied up in accounts receivable, and there is no cash to pay employees.  You definitely don’t want to find yourself in that position.

Not only do you lose out on that invoice, but you also spend resources trying to collect your payment. Each bill you send costs you money and costs your staff time.

Even if you leverage technology to collect accounts receivable, you have to pay collections companies or lawyers to get customers to pay.

2) They Don’t Pay Enough (Or Don’t Want To Pay)

Some customers will nickel and dime you to death. This type of client puts you on the defensive from the start. During the sales process, they question your pricing.

For example, if you produce a creative product, they may ask why they’re paying you so much to do a few hours of work. They don’t understand the investment you made acquiring the education and experience to deliver your offering efficiently.

That doesn’t mean that anyone looking for a good deal is a bad customer. After all, that’s just good business. Instead, be wary of customers who complain about the pricing, don’t seem to understand your answers or justification, and then sign their contract anyway.

These customers are often overly demanding once they hire you. They want to make sure they squeeze every penny out of you. They’ll send things back over and over and will likely undervalue the work you do.

3) They Have Unclear or Changing Demands

Often, many harmful customers have unclear or changing demands.

Imagine you and your team spend weeks preparing a proposal for a client.  Nothing is worse than delivering on a project only to be told your work doesn’t meet their objectives. You know, the objectives they didn’t tell you about to begin with.

Mistakes do happen, of course. Sometimes poor communication is the root cause of not meeting expectations. However, when you give a customer what they ask for, and they’re still unhappy, that’s another problem entirely.

When the customer moves the goal post, nobody scores. You have a wasted effort and an unhappy customer on your hands. And if you point out their behavior, you look like you’re making excuses.

Identify these clients early by their shifting expectations and their lack of engagement at check-in meetings.

Their demands early on are often vague and disorganized. It’s nearly impossible to provide great customer service when you don’t know what the customer wants.

4) They Want ALL the Attention

Each customer is different, and some will take more of your time than others. Additionally, it’s reasonable to expect that newer customers will need more hand-holding. However, you need to watch out for customers who take too much time.

If you’re a small business, you may not have the resources to deal with these clients. And even if you do, it doesn’t make sense to spend all your team’s time on one customer. So, how do you identify the attention seekers?

Start with data. Find out which clients are generating the most tickets. Identify how long their interactions take and how many touchpoints they require. Beware of anyone taking more than their fair share.

And talk to your staff. Your employees should feel empowered to tell you when customers are being unreasonable or asking too much. Then document their concerns and act on them when appropriate.

5) They Aren’t Available

While some bad customers are unprofitable because they consume many resources, some cause problems because they don’t speak to you enough.

Consider the client who won’t return your calls or emails. How much time do you waste trying to track them down? Or what about the clients who schedule meetings and ghosts you. That’s an hour of your day you could have spent more productively.

In addition to the time and productivity costs, unresponsive clients also miss out on the value your offering could provide.

For example, a customer who doesn’t show up for their onboarding meetings won’t know how to use your product and won’t be as successful as those who attend.

This can mean higher demands on your customer support team, poor customer success metrics, and higher levels of churn. Sure, we all miss a meeting from time to time. But identify these customers by a pattern of absence and raise the red flag.

6) They Aren’t Honest

The customer is always right—wrong. In fact, some deceptive customers may lie to you on purpose. And that’s a big red flag.

Common lies include:

  • Claiming you promised to deliver things you never promised
  • Telling you that another employee made promises
  • They claim to have had a bad customer service experience
  • Making up stories about the actions of your employees
  • Under-representing their needs during the sales process
  • Under-representing their ability to pay

In each of these situations, their dishonesty causes problems for your business. You can trust what they say so you can’t act on it. Plus, their lies can also foster distrust among your team.

If you catch a customer in a lie once, give them the benefit of the doubt. If it becomes a pattern, you should document the behavior. Honesty is in everyone’s best interest.

7) They are Abusive or Threaten Your Staff

Sometimes rudeness or bad behavior is the result of a bad day or a bad week. And that can happen to anyone. What you’re looking for here is a pattern of behavior.

Customer horror stories are everywhere. Watch out for things like this:

  • Egregious personal attacks
  • Aggressive accusations of bad customer service
  • Threats consisting of personal harm or property damage
  • Shaming, especially when others are present

Nobody deserves to be treated like this. You need to act fast to deal with customer threats. Rude or abusive clients put undue stress on you and your staff. If a call rises to the level of abuse, it is best to record calls for further review, or even for law enforcement purposes.

And stressful work environments can lead to higher levels of staff turnover. Studies show the cost of turnover can run you $15,000 per employee.

A good employer will “foster a great employee experience.”  What’s more, a negative employee experience can affect your employer brand. Things like bad reviews on LinkedIn and similar sites can make it more difficult for you to hire good people going forward.

Any good company wants to provide good customer support. And so they train their teams with the customer service skills to do just that.

A bad customer will take advantage of your kindness and ethical business practices. And they may even accuse you of poor customer service.

8) They Make Unreasonable Demands

Most customers just want their needs to be met. And if you’ve done a good job acquiring customers, you’ll be able to do that, no problem. But some customers will ask for more than you can deliver.

Not all of those customers are bad. In fact, many just don’t clearly understand what you offer. However, a customer crosses the line when they won’t take no for an answer.

Beware of customers requesting numerous revisions above and beyond what was promised. Other common problems include expecting you or your team to be instantly available to them at any moment.  Of course you’ll do your best, but no business can attend to every client every minute of every day.

Unreasonable demands pull resources from loyal customers you can help. And like rude or abusive behaviors, unreasonable demands affect your employee experience.

9) They Complain to Anyone Who Will Listen

Complaints are a normal part of doing business. And with social media, it’s easier than ever for upset customers to make you look bad, too. The cost of a simple tweet can be very high.

According to Moz, a vast majority of customers are influenced by bad reviews.

“Businesses risk losing as many as 22% of customers when just one negative article is found by users considering buying their product. If three negative articles pop up in a search query, the potential for lost customers increases to 59.2%. Have four or more negative articles about your company or product appearing in Google search results? You’re likely to lose 70% of potential customers.”

How to Handle Bad Customers

image: Nexitva
Clearly, you can’t afford to ignore online reviews. And if those reviews are unfair, their impact goes way beyond one bad customer.

10) They Don’t Listen to You

Customers who don’t take your advice are also bad for business. They’re wasting your time and their money. Plus, they won’t see returns on your services.

For example, if you’re a financial planner, your job is to give your clients sound advice to meet their goals. If the client doesn’t take your recommendations, they run the risk of failing.

And clients who don’t reach their goals are unhappy clients. They may end up blaming you or, worse, giving you a bad review. And they probably won’t use your services in the future.

Additionally, their failures reflect poorly on your business metrics and KPIs. You can’t show off your great stats when customers aren’t successful.

What should You Do with a Bad Customer?

1) Assess Their Value

The costs of customer acquisition are certainly higher than the costs of customer retention. So the question you need to ask is, “What is the value of keeping this customer?”

Here are some key things to consider:

  • Their cost versus their profit. Here’s where you’re going to want solid data. Strong ticketing systems can easily pull up useful metrics like how many tickets a customer generates, how many touchpoints are required, and their invoice history. If they’re costing you more than you’re paying, that’s a red flag.
  • If your bad customer is a high-profile customer, then they may be worth the headaches they cause. Make sure you’re ready to deal with any loss of prestige or social media consequences.
  • What are the consequences of losing this client? You may be in a situation where the risk is too great.

2) Have a Real Conversation

Communication is key. Any change in your relationship is going to have to start with talking to the customer. The goal of this conversation is to move your relationship in the direction you’ve chosen when you assessed the customer value.

  • Be transparent and honest about your concerns.
  • Manage their expectations. Clearly explain what you can and can’t do for them. If you’re keeping them as a client, then make sure they know what to expect going forward.
  • Get on the same page. Make sure you understand their needs and that they align with yours.

3) Refer Them

Sometimes, a bad customer is just a bad fit for your business. In that case, one way to deal with them is to help them find a better fit.

If you know your competition, you’re in a position to suggest someone else. If you do a good job suggesting a good fit, then you make friends in the industry and make a happy customer.

One possible downside is that the company you refer to might not appreciate their business. Don’t refer truly bad customers to anyone whose opinion you value. And if you’re unsure, it doesn’t hurt to ask the other company if they do want the referral.

4) Fire Them

Sometimes the right answer is to walk away.

So, how do you deliver bad news to customers? Gracefully. Here are some tips for moving on with a minimum of fuss:

  • Get the right person to deliver the news. A manager or higher-level employee will have authority. And if the customer has a problem with an employee, definitely keep that person out of the conversation.
  • Be direct. With a clear and direct explanation, you will minimize the likelihood of a misunderstanding.
  • Be decisive. Prior to the call, you made your decision. There should be nothing to sway your decision.
  • Be kind. After all, even the worst customers deserve to be treated with respect. Demonstrate empathy and offer a graceful transition plan out of your business.

5) Don’t Acquire Them to Begin With!

As the list above suggests, many bad customer relationships stem from mismatches and poor communication and unclear expectations. So, you want customers who are a great fit.

Here are ways to attract better customers who admire your company:

  • Develop a detailed customer persona to help you identify your best customers.
  • Verify all marketing claims for accuracy on your website, blog, social media, and emails.
  • During the sales process, confirm there’s a real demand for your product. Just because someone seems like a good fit at first glance doesn’t mean they are ready to implement it.
  • Ensure all expectations and contracts are crystal-clear from the outset.
  • Don’t sign on new customers you can’t serve. As a business owner, it can be tempting to see any customer as a good customer.
  • Price your services appropriately. High-touch services generally require more financial investment from clients.

Conclusion

Bad customers may be a fact of life, but there’s plenty you can do to keep a bad experience with them from ruining everything. By identifying those bad apples, you can deal with them effectively.

In many cases, it’s not the customer’s fault per se, but the company shares responsibility in their experience along the way. Recognize and prune unfit customers before they harm your reputation. Likewise, nurture and wow your existing customers so they can’t help but tell others about their experience.

Image: Depositphotos.com

This article, "How to Spot Bad Customers – and How to Deal with Them" was first published on Small Business Trends



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