You know the old saying: “Any business is good business”? Sounds like it makes sense right?
These days, any business is NOT good business. In fact, in 60% of businesses, success seems impossible because of the wrong type of customers.
These days, any business is NOT good business.
Understanding and figuring out who your ideal customer is is paramount to success. Narrowing your focus and restricting your buyer profile will do wonders. This is exactly what one of our clients did. This may sound counterintuitive to most people. Why would you want to reduce the number of people who could qualify to give you their money?
Let us take a few examples to demonstrate what kind of harm the wrong type of customers can bring to your business:
Loss of time
In most businesses, 80% of customer service issues are due to 20% of the customers. These can be categorized as the wrong customers – broadly. I know I am painting large brush strokes here but if you look at the data and facts out there, you will start seeing sense in this premise. Here is some interesting reading on this question.
If you analyze your business right now, I am sure you will notice that a lot of the headaches and issues are caused by a small number of customers. Usually, these are small-ticket customers and would have bought your product or service purely based on price evaluation.
Spending lots of time dealing with customer service issues is a drain on your time and resources. Assuming that these issues are not due to serious flaws in your product, service, or process flow, you would be better off spending that time on taking care of your “good customers” or on business development.
Example story: One of our clients, Anne, told me this story of a customer who engaged her copywriting services. Right off the bat, the customer had haggled on the price and extracted a discount from Anne while claiming that he did not need anything elaborate and that he would be happy with some simple copy to use in a brochure. After the project began and Anne sent the first draft of the marketing copy, her troubles began. She got back an email with one sentence: “not happy with the copy. please rewrite more professionally”!
Anne was livid reading this. She had spent over 8 man-hours researching, brainstorming, and then writing and rewriting the copy. Anne has over 12 years of experience in writing marketing copy and has a few awards under her belt.
So she emailed back the client asking for clarification. She wanted to know what exactly he did not like and what part he wanted to be changed.
His reply: “If I knew what parts to change why would hire you and pay that much money”!
Wow! Anne was amazed at that response. But you know what? I am not. I have seen my fair share of such nonsense in our agency – a few years back.
Anyway, this went on for days. Finally, Anne gave up and went back to the drawing board. She rewrote the copy and even added an additional section that was outside the scope of the project.
You can guess what happened next. More such short and nonsense replies. Then came the phone calls. Time was draining like water through a cloth sieve. Anne spent countless hours on this project. After 3 weeks, all of a sudden, she gets an email from the client that he was still not happy with the copy and wanted a refund!!
I will not go into what actually happened after that. But Anne should have fired this client right after the first email. Better yet, she should have said no to this customer to start with.
Yes, I know. How could Anne have known this customer was bad? You can not turn down projects just because you get a bad vibe or because the customer haggles on the price.
Yes, you can! And you must! I will tell you more about this further down in this article.
In most businesses, 80% of customer service issues are due to 20% of the customers.
Loss of money
Often bad customers can lead to your business losing money. Focusing on trying to please bad customers takes away time from taking care of your good customers, increasing their lifetime value and from business development. This leads to loss. You not only lose money on the bad customer’s projects but also leave money on the table because you are too busy dealing with nagging clients.
This may come off as harsh. But it is the truth and you must call a spade a spade.
Example Story: Back in the days when we are SpellBrand used to have packages for our service with fixed rates, we had a service that included creating Facebook and Twitter Cover images and avatars. It was priced at $150. Most of the customers who chose the cheapest package and purchased this add-on always almost used to come back with outrageous requests. They would give examples of Facebook pages of brands such as Nike, Mcdonald’s, Coke, etc, and ask that we create cover images that would make their pages be as popular as those bigger brand pages!
Those bigger brands Facebook pages were popular not because of their cover images but because of the relentless marketing the companies do and the amount of money that is invested in their social media campaigns.
We would create cover images for these clients that aligned with their branding and their business but they would reject the designs, time and again, and demand that we create something similar to what the bigger brands had.
Sometimes we would do 7 or 8 different cover images. The average cost for us would be over $500 on such projects. So we were not only losing money on the add-on but also taking a loss on the main project. We would have better off not taking these clients in the first place.
We did learn our lesson and got rid of our cheap packages and implemented a strategy that stopped such customers from even approaching us. I will talk about the tactic further down in the article.
Loss of spirit
The biggest damage bad customers can do to your business, in my opinion, is to your spirit and motivation. They can drain you of the joy and passion of running your business and providing a high-quality product or service. Bad customers can lead to despair and take you to the brink of giving up and closing shop.
It may sound dramatic but it is true. If you start dreading emails or calls from customers who see no sense in rational thinking and expect you to deliver the world on a platter for less than nothing, then you lose your drive and passion for your business. Instead of customer service being about helping your customers and enjoying the sense of elation that comes from seeing a happy customer, it becomes a nightmare. Something that has to be avoided. Customers start looking like the enemy rather than the reason why your business exists for.
That is when your customer service levels will drop which in turn makes the situation worse. You will have angry customers – both good and bad ones. You will be driving away your best customers because you stopped caring. You will be stressed and lose sleep over it. You will start to hate getting up and going to work.
Example Story: I know of a friend who actually gave up her business and went back into the workforce just because she lost all motivation and passion for her business due to the wrong customers. Jessica quit her job as a business strategist at a large PR firm to offer her services to small business clients directly as a consultant. She had amassed over 8 years of strategy experience and wanted to make a difference in the lives of small business owners and entrepreneurs.
It started out great. She got her branding done, a shiny new website, and started marketing her service. Soon she started getting inquiries followed by paying clients. Jessica was over the moon. She was living her dream. She was her own boss and was doing what she loved most.
Then things started taking a turn for the worse. It all started with customers paying her base strategy session fees which included competitive research on the business and a one-hour phone or Skype session during which Jessica would outline a strategy to help the client propel their business to success. After the session, Jessica would answer 2-3 emails with any questions or clarifications. However, what she started noticing was that clients would pay the base fee and expect that she create their entire branding and marketing strategy as well as hold their hands during implementation. They expected her to pick up the phone and talk to them anytime they wanted and offer more advice.
When Jessica started to put her foot down and let the clients know that the service only included the call and 2-3 follow-up emails, they started getting angry. She had to answer angry clients by email and phone. Since most of these clients were small business owners starting out on less than a shoestring budget, they felt that Jessica was responsible for the implementation and eventual success of their business. A lot of the clients requested refunds and some even went for a chargeback.
This started taking a toll on Jessica. Instead of spending time researching and providing a good service to new clients, she spent most of her time and energy trying to calm and appease angry clients. She started dreading customer service. She hated answering emails. She dreaded picking up the phone. She felt trapped in a nightmare.
To cut the long story short, eventually, Jessica gave up, threw in the towel, and shut down her consulting business. In a few months, she went back to finding a job.
How to stop attracting the wrong customers
We get to the meat of the article and what you have been patiently waiting for so far. How to stop attracting the wrong customers. In all the above cases, the main problem was attracting the wrong customers. Sometimes it was a simple case of not identifying the correct target profile which meant attracting the wrong customer. In other cases, it was a case of bad pricing strategy which attracted the wrong type of customer.
Here are 3 steps to take to ensure you don’t attract the wrong customers:
1) Creating a focused buyer persona or target profile strategy
The first thing you would need to do if you are just starting your venture is to work out who your correct customer is. Even if you have been running your business for a while and are struggling with attracting the wrong customers, evaluating your existing customers and figuring out your ideal buyer persona is critical.
Do not try and target everyone in the world. In the case of my client Anne, she targeted anyone who needed copywriting services. In Jessica’s case, she thought her target audience was anyone who needed business strategy advice. On the face of it, this outlook makes sense right?
Targeting a broad range of customers is a recipe for a disaster. At the very least, it would mean mediocre business success. You have to really drill down and get to the core of whom you want to serve. There are different types of copywriting needs. Marketing copy used in advertising. Copy for sales letters. Copy for websites. Copy for content marketing. Copy for verticals such as just real estate agents or dentists or cosmetics companies. You get the idea.
Targeting a broad range of customers is a recipe for a disaster.
Granted that when you are starting out, it may seem like brand suicide to focus on a narrow niche and reject the broad world out there. But understanding who your ideal customer is very important and nothing else should be done till you nail this down. Here is a link to an article to help you with that: How to create buyer personas for increased sales.
2) Creating the right pricing and profit strategy
9 times out of 10, when a business attracts the wrong customers, it is due to a bad pricing strategy. Most often it is due to pricing too low. Not knowing your value or the value of the products or services that you provide is all too common.
Most business owners simply price their products or services based on the competition or their need to grow the business.
Both these approaches are flawed. Basing your pricing on the competition means you are simply entering a dog race that is influenced by price wars and the race to the bottom. If your competition lowers their pricing, you are forced to do the same just to survive in the market. Economies of scale and a more efficient process may enable your competition to lower prices and still make a profit. That may not be the same case for you.
Basing your pricing on the competition means you are simply entering a dog race!
Basing your pricing on your needs to drum up some business is a serious flaw too. It just shows that you are not prepared to think long-term. If you do not have the means to survive a slow business growth then you should not be starting your business at that point in time. This may sound contrary to what most business gurus say. Waiting for the right time may be too late for a business.
Jump right in and then sort out any issues is the prevailing mantra. In my opinion, that is wrong.
Having a buffer to survive at least 6 to 8 months without cash flow is fundamental to any business. This allows you the luxury of looking at the value of your product or service and then pricing based on the value you bring to the market.
Having a buffer to survive at least 6 to 8 months without cash flow is fundamental to any business.
I am not advocating that you simply price your product or service high. I am saying that you need to reframe your business and your brand story to enable you to charge more. If you have a valuable product or service – even though it may be one of the hundreds of options out there – you deserve to set yourself apart through value storytelling. With the right kind of storytelling, you can charge more.
Charging more and increasing prices has always increased business and profits for a ton of brands out there – if done properly. If you look at brands such as Apple or Ted Baker or Mini etc, you see that they charge more than their competitors and are still sought after in the market. Agreed that in most cases they have superior products but they have also better storytelling and pricing strategies.
So take a serious look at your product or service and go for value-based pricing rather than trying to be the cheapest out there. By being the cheapest or lower-priced, you attract the wrong customers. You attract customers who make decisions based on price and not value. You do not want to work with such customers because they lead to one or more of the scenarios I talk about before.
Avoid attracting customers who make decisions based on price and not value.
3) Create the right storytelling
Your brand narrative, the visual language, and your online presence all act as beacons in attracting the right or wrong customers. Telling the wrong story attracts the wrong customers. In fact, in most businesses, there is no story. They simply have a product or service and a sales pitch.
Often the sale pitch is not confident or focused. It goes back to point #1 above and tries to be generic and attract everyone or anyone. It is a watered-down to try and appeal to a broad range of customers. This leads to a message and story that are neither effective nor powerful.
So what happens when you have a watered-down story or even the lack of a brand story. Yes, you guessed right! You end up attracting the wrong customers. You need to step up and distill your brand essence that in turn helps you create a powerful brand story.
No Brand Story = Attract Wrong Customers
Telling the right story involves the following elements:
- Think inwards – distill your core values and your brand purpose. This will help you create the brand story.
- Create a mission statement if you don’t have one. This is very helpful in the process of creating your brand story and narrative.
- Dig deep to understand why you started the business in the first place. Understand your motivations and those of your brands.
- Find elements that make your brand unique. What sets you apart? What makes you stand out?
When telling your story, try and visualize the ideal customers. Craft your story to appeal to them. Introduce story elements that would filter out customers that are wrong for your business. For this, you need to go back to the buyer profile creation step.
Every business is different and everyone has different circumstances and my narrative above may seem a little too generic or black and white. But I am trying to set the groundwork up for your understanding of the importance of knowing your wrong customers and avoiding them. This is about learning to say “no” to all types of business and trying to focus on saying “yes” to the right kind of business.
Hopefully, I was able to at least get you thinking about this topic. If you have any horror stories of wrong customers to share, please post a comment below or ping me on Twitter @bonigala.
When to Listen to a Customer
Customer feedback is probably the most over-hyped part of modern business. That’s not to say it isn’t useful, however. It is: not only do you get valuable feedback on your services, you also get great insight on possible new products or upgrades to your brand.
But not all customer feedback is a golden road. In fact, sometimes it can lead you down the wrong path, and drive your business to failure instead of success. There are many factors that affect how useful customer feedback really is.
Consider the Source
Who is the customer, and why are they giving you feedback? Some customers will give feedback on products they know nothing about, just to feel the satisfaction of having their voices heard. Others may see surveys as an intrusion and give misleading feedback on purpose just to mess up the results.
Is this person your target customer? Are they familiar enough with your product that they are giving accurate opinions? Technology, software, and other products with a very high learning curve attract more than their fair share of negative feedback borne from ignorance, and not actual educated use.
Make sure that you identify the customer properly in order to qualify their opinions. If these are customers you consider valuable, then their opinions are valuable as well. If not, it’s best to just set the feedback aside and move on.
Consider the Situation
Is the customer involved in a high tension encounter? When tempers flare, people on both sides of the table can often misunderstand the situation and draw erroneous conclusions. The customer’s feedback may not be justified, or even applicable.
Don’t take an angry customer’s feedback as gospel. Get the story from both sides of the counter, and make your own judgment on whether or not your employee is behaving properly in this situation. Remember that customers can misbehave too, and that the customer is not always right.
Consider your Goals
Are you getting customer suggestions that steer your business in a wholly different direction? Quite a few companies—especially technology and software companies —receive user requests for additional features that don’t suit the product’s core value proposition.
Adding the requested features would either break the product, or turn it into something else entirely. But then again, doing so might lead the company into something big.
When a large sampling of customers starts clamoring for something different in your services, take a step back and see how it aligns with your overall company goals.
Is this a direction your company was going to take sooner or later? Is it too much of a departure from your core goals? There are many examples of either scenario working, so it all comes down to how well you know your customers, and how well you know your business.
Speaking of which:
Consider your Market
Have any of your competitors ever made such a radical shift before? How did it work out for them? Observing your competitors is a perfectly viable strategy for growing your business, and it can be better to watch them take a risk and fail instead of you falling in their place.
Just don’t get left behind.
Do your due diligence and check to see if any other company has been in a similar situation. Learn about the pitfalls they encountered and how they overcame (or fell to) these challenges. Take those lessons and apply them to your business.