Paul shares some ideas on this crucial question of discernment.
Show Notes
Be proactive. Know the business you want to pursue and what not to pursue.
Profile your best customers to help you find new customers.
Create a profile for the customers you want the competition to have.
Determine the opportunity cost: Is what you sacrifice worth what you gain from this customer?
Be sure you’re getting as good as you’re giving. This may mean a price increase to the troublesome customer. Are they willing to pay for your value?
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When and how do I walk away from customers who don’t see the value?
(Transcribed from podcast)
Today, we are going to the website again—this is like two weeks in a row. Beth, I want to thank you. Beth, thanks for filling out the question form. You went to TheQandASalesPodcast.com, and that’s what I encourage all of you to do. So all the listeners out there, if you’ve got a question, fill out the form and I will answer it. This is proof positive.
So, Beth has a great, great question. Her question is, “At what point do you walk away when they don’t see your value? And, of course, they means the customer: At what point do you walk away when the customer doesn’t see the value? This is such a crucial question, and Beth, I’m glad you filled out the question form. And I’m going to share a couple thoughts and ideas.
Before I do that, though, just a reminder of the Selling Through Tough Times book and Value Added-Selling. Both of these are available on Amazon, wherever you get your books. In Selling Through Tough Times, we talk about discernment and really knowing which business to pursue and which business not to pursue. And I’ll speak to that a little bit on today’s episode because there’s a whole chapter dedicated to this in Selling Through Tough Times. So pick up your copy. It’s available as an Audible audio book and it’s available worldwide, so check it out. And if you buy it, hey, review it and rate it. Let me know what you think as well.
Let’s get back to that question: At what point do you walk away when the customer doesn’t see the value? First thing we’ll talk about is how to be proactive—how to be proactive to prevent this from happening to begin with. And what we’re going to talk about is the power of discernment. The power of discernment—it’s knowing which business to pursue, but more importantly, knowing which business you want to avoid.
Peter Drucker, the famous management guru consultant, he is quoted often in the business world. And one thing he said is that the mark of a good manager is knowing which projects to pursue. But the mark of a great manager is knowing which projects not to pursue. And we could build on that for salespeople and say, the mark of a good salesperson is knowing who we need to pursue, but the mark of a great salesperson is knowing which business not to pursue.
So first things first, Beth. What I would do is build a profile. Build a profile and you can call it your high-value target profile. And all you need to do is look at your best customers and ask yourself, “Okay, what do my best customers have in common with one another?” And once you determine those commonalities, build a profile on that. And now you know what to look for when you’re out there pursuing new business, pursuing new opportunities. Your goal is to select prospects and spend your time on those opportunities that are a fit in that profile that you’ve created. So that’s the first thing I would do.
And the next thing I would do—we’re still talking about the power of discernment, and the other side of discernment is knowing what not to pursue—Beth, I would also take a few minutes and think about the worst customers that you’ve ever interacted with. You know, those customers that complain all the time, that asks for discounts, that asks for concessions, that pay their bills later, that are a pain in the neck to deal with. They don’t appreciate your value. There’s a high aggravation factor. [Exasperated sound] I could go on and on. You know which customers I’m talking about. These are customers that we want the competition to have. Create a profile for them as well: what do your worst customers have in common? And that way, when you are determining how to spend your time, you can quickly look at both the profiles and say, “Okay, this opportunity that I’m working on, is it closer to being a high-value target, or is it closer to being one of those terrible customers that I just don’t want to spend my time with?” And the key is to make sure that we spend our time on our most viable opportunities.
Now, again, back to your question, what point do you walk away? You know, in the value formula, we talk about what people sacrifice versus what they gain, and this concept obviously applies to our customers. When customers are making a buying decision, they look at what they sacrifice, and they compare that to what they gain. And as long as what they gain is greater than what they sacrifice, we call it value. It’s value to the customer. We could take this same formula and apply it to determining when we should walk away from customers.
So, looking at the customer (and I’m sure you have a customer that you’re thinking of is as you listen to this episode), ask yourself, “Okay, as a company, what are we sacrificing? What am I sacrificing as the salesperson?” And you’re sacrificing your time, your energy, your effort. Your company is sacrificing resources. Ask yourself, “Is what we are sacrificing as a company and me as a salesperson, is it really worth what we’re gaining from this customer? Is the business worth it?” And, if the business is not worth it, it’s not value.
So, we want to make sure that we’re always creating value for our customers, but when we create value for our customers, it also means we’ve got to create value for our own company. And so, I would go and look at the customer and ask yourself, “Is what we’re sacrificing worth it?” Is the juice worth the squeeze? That’s another way of saying it. But use that value formula. And if what you’re sacrificing is not worth what you’re gaining, then I would take a long, hard look and determine, hey, maybe it’s time to walk away.
Now the other question we can ask ourselves is, “What’s the opportunity cost?” What else could you be doing with your time, with your energy, with your resources? If there are more viable opportunities that you could be pursuing, you just don’t have the time, then absolutely, I would let the customer know, “Hey, it’s just not working out. We’re going to need to do something different.” So I would look at the opportunity cost because, remember, you only have so much time and your company only has so many resources. Those resources may be better suited going after another opportunity. So what is the opportunity cost? What could you be doing with your time, your energy and your effort?
Now, finally, as you ask yourself, those two questions, the next thing you want to do is take action. So if you determine that the customer is no longer a good fit, if you determine that they just don’t see the value, when it’s time to walk away, here’s how to do it. I never really understood the whole concept of firing a customer, where we call them up and we say, “Look, we’re no longer doing business with you. Go somewhere else.” I understand that there are some moral reasons why we might do that. But just a traditional customer, who’s just a pain in the neck, who’s no longer worth it, we don’t want to fire that customer because that will close the door for future opportunities. So, barring any moral issues where we have to tell a customer, “Hey, we’re no longer working with you because of these violations,” that’s perfectly acceptable. But if it’s just the fact that they’re a pain in the neck, they’re hard to deal with, they’re no longer worth it, but they haven’t done anything morally wrong, we don’t want to fire them. We want to keep the door open for future opportunities.
So here’s how we do it. We want to exit gracefully, but we want to give them a chance; we want to give them a choice. So here’s how we set up the conversation with our customer. So back to the question, first of all, Beth, when you say, “Okay, at what point do you walk away when the customer doesn’t see the value?” Typically, this happens because the customer wants your value, they just don’t want to pay the price for it. So it’s typically when you have a low-margin type customer. So again, here’s how we set up the conversation. We meet with the customer, and we give them a choice. We let the customer know, “Hey, is a business decision. Moving forward, if we’re going to continue to take care of you, our customer, at this level, we need to change a few things. And that includes our price. We just need to make sure that it’s an equitable piece of business, that we’re getting as good as we’re giving.” I would give them a choice; raise the price. Let them know, “Hey, if you want us to continue to take care of you, here’s what the new pricing level is going to be.”
Now, if the customer says, “Well, we just can’t accept a price increase at this point,” or “We can’t accept that,” then you have a couple of other choices. One thing I would do is make fewer concessions for this customer. Don’t do anything to go above and beyond to take care of them. If they don’t want to pay for your value, then give them the value that they are willing to pay for. So don’t make concessions for them. Follow procedures and policies that are in place, and then deprioritize the custom. If they’re not willing to pay for your value, then there’s no reason to go above and beyond. And if they start complaining and if they continue to be a pain in the neck, then you can say, “You know, there’s always an option to look at other competitors of ours. You can reach out to them and see if they’ll be able to take care of you.” And again, default back to the fact that if they’re not willing to pay the price, they don’t deserve to receive the value that you provide. And just make them aware of that and say, “If you want us to provide that level of value, we’re going to need to raise the price.” And that will, oftentimes, be enough for them to either go to the competition or agree to a price increase.
All right, Beth. Thanks for asking the question. Just to recap, number one—make sure you’re pursuing the right business from the very beginning. Number two—apply that value formula. Ask yourself, “Okay, is what we sacrifice worth what we’re gaining from this customer?” And also, third—ask yourself, “Okay, what’s the opportunity cost? What else could we be doing with these resources and with our time?” And if you do decide that this customer is worth keeping, go in and talk to them and say, “We need to change things. If you want us to continue to service you at this level, we’re going to need to raise our prices.” And if they don’t agree to that, then deprioritize them. Don’t make them a priority anymore. And, also, make fewer concessions, which means, “We’ve got to stick to our policies and our procedures to do what we can to make the business profitable.” That will likely either get them to change or it’ll get them to change to another competitor.
Make it a big day.
