Firing a Customer

Quick Summary: Terminating a customer relationship may be the best option.

Abstract:

Despite good intentions and optimistic attitudes, sometimes a vendor and a customer simply cannot form a mutually acceptable arrangement regarding the purchase of a new product or service.  The reasons behind the dissatisfaction can vary, but after repeated attempts, if no agreement can be reached, it is better to terminate the relationship.  Vendors are typically reluctant to initiate the process, but in many cases it is better for them to call the question than to wait for further degradation in the relationship.

Every seasoned sales rep can think back to a time when, in hindsight, they realized that the only thing worse than losing an order was getting one that they never should have gotten in the first place.  The cause of the misfit can vary from:

  • An intentional or unintentional representation or interpretation of the product or service
  • A fundamental defect in the product, with on-going issues
  • A change in the customer’s requirements or applications
  • A change in the customer’s business focus
  • Market dynamics
  • Internal customer employee resistance or capabilities
  • Seemingly unreasonable demands for support

The list can go on and on.  Independent of the reason, if all reasonable corrective actions have been attempted and the root cause of dissatisfaction cannot be removed, it may be necessary for the vendor and customer to part ways.  Instead of taking decisive action, the decision to terminate the relationship is generally postponed, leading to increased anxiety and frustration.  Reasons for not making the decision can vary: the vendor does not want to reverse the recognized revenue or return the customer’s payment.  Or, the customer does not want to admit that the termination may have been the result of an improper decision on their part.  Finally, both parties will probably be reluctant to officially terminate the relationship because they will have to admit that the time and effort expended was wasted.

Needless to say, both parties will suffer a loss in terms of direct cost, indirect cost, time, or missed allocation of resources.  In most cases, both parties can recover fairly quickly once the decision is made.  Aside from the financial implications, the vendor, in most cases, has much more to lose in not resolving the situation and moving on.  An unresolved negative customer situation can have a significant impact on the company’s reputation and may stymie other active sales opportunities.  The near-instant access provided by social media and search engines can spread the bad news situation worldwide.  Those negative articles and postings can last for years.  As a quick demonstration, perform a Google search of virtually any subject and examine the dates of the postings.  Do not be surprised if you encounter information from many years ago.

Although the term “fire the customer” seems rather dramatic, it is in the best interest of the vendor to initiate the termination action when they are convinced there is no long-term, mutually acceptable solution.  The term “fire” is probably not appropriate to use when dealing with the customer, but none the less, that is the required outcome.  There is no value in attempting to assign blame.  The dissolution will probably be painful for both parties, but once complete, will allow both companies to move forward.  If handled correctly, there may be an opportunity for future sales, or at least terminating the relationship with no negative market impacts.

On a brighter side, once the suggestion that the relationship be terminated, the customer may ease off in their demands, realizing that the net gain from continuing is positive.  Some customer organizations simply feel compelled to push their vendors to the breaking point.  If the vendor does not draw the line, these customers may continue to do so.

Without taking action, a likely outcome can involve the customer making demands, probably through their attorneys.  Once attorneys are engaged, “battle lines” will be drawn, and reasonable person-to-person resolution may no longer be possible.  Instead of an amicable termination, a “winner and loser” approach may be taken in which no one ever truly wins.

Calling the “fire the customer” question internally first will require the vendor to non-emotionally consider the implications of continuing to pursue corrective actions or terminating the relationship. Until this point is reached, it is not uncommon for emotions to run high, with advocates or resentment dividing the organization.  This situation is never easy, but it must be remembered that making no decision is a decision in itself.

 

Article Number : 5.030305   

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