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How Challenging Customers Can Drive Business Value

Striving to retain existing customers can drive overall performance improvements and lead to exciting product innovations.

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Life would be so easy without having to deal with challenging customers, but being in business means being in competition, and that means delivering on your customers’ needs, wants or demands. As entrepreneurs, we are in competition to develop, sell and deliver innovative solutions that meet or exceed our customers’ expectations.

According to the Harvard Business Review, the cost of acquiring new customers can be anywhere between five and 25 times more than retaining existing ones. Furthermore, industry research from Bain & Company indicates that growing existing customer relationships can be more profitable than developing new ones. Additional research supports how the useful concept of customer lifetime value (CLV) can help business leaders deliver more value to their clients. In addition to these financial discussions, it’s my experience that striving to retain existing customers can drive overall performance improvements and lead to exciting product innovations.

Regardless of what creative industry branch you operate in — retail, grocery, restaurant and bar, entertainment, hospitality, manufacturing, and so on — you have a customer base with needs. By analyzing different customer types (i.e., happy, challenging and unreasonable customers and quiet leavers) you can make better decisions to drive value in your organization. 

Happy Customers, Challenging Customers and Quiet Leavers

We’re in continuous competition for a customer’s purchasing decision; the ultimate sign of a customer’s trust is when they agree to pay us for our products or services. We’re constantly being judged by how well we keep customers satisfied. When we deliver the right product with the right quality at the right time and the right price and the customer is satisfied, then we’ve earned the right to ask for a customer’s trust and business again in the future.

If we continue repeating this pattern, they return for more business, and perhaps even provide referrals, and we have a “happy customer.” We all love happy customers and, as good entrepreneurs, are motivated by retaining them.

But what happens when we miss the target? What happens when something goes wrong in our value delivery chain and the customer is dissatisfied? Does the customer go away as a “quiet leaver,” never to trust our organization with their patronage again? Or does the “challenging customer” engage with us to push us to do better? Finally, how do we react when a customer challenges us to do better?

Big Decisions

We had a large customer a few years ago that had already been buying our equipment. This customer wanted a modification done to better support its business. Our design/manufacturing arm was reluctant about providing the requested modifications, which delayed our response. The designers had perceived this customer to be a complainer, an “unreasonable customer” with unreasonable expectations. At some point in my dialogue with the customer, it clearly expressed that this was not a want but rather a demand. The customer gave us an ultimatum: Deliver what we’re requesting, or we’ll go elsewhere for a solution.

I had a decision to make: Consider this customer an unreasonable customer and walk away from its business or view it as a challenging customer, understand its needs and develop a solution.

Appreciating the Challenging Customer

I am truly grateful to this customer. It could have quietly slipped away, taking its business elsewhere. Instead, we had earned its trust in so many other ways, with quality, service and support. This customer came to us and challenged us very clearly, giving us the opportunity to rise to the occasion. I am also truly grateful to this customer because it gave us some very insightful ideas to deliver to the design/manufacturing team, thus giving it the proper motivation to quickly develop the needed solution.

We accepted the challenge, leveraged it to drive positive change, met the demands, developed a value-adding option, satisfied more customers (not just “the challenger”) and drove more sales. It remains an option we offer and sell frequently — and we’ve retained “the challenger” for years.

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The Challenging Versus the Unreasonable Customer

There are times when it’s appropriate to determine a customer is being unreasonable, but this is not a decision to be taken lightly. When a customer is making demands that are not aligned with a business’s strategy or perhaps doesn’t value your solutions appropriately and is thus unwilling to pay the price your organization requires, the customer may no longer be a fit. If we recognize such a situation exists, then we have to determine if it’s an unreasonable customer or a challenging customer in disguise. We must engage the customer and, regardless of the outcome, we always have to treat the customer with integrity and respect.

Strategic Questions

Prior to starting my own business more than a decade ago, I worked for publicly traded blue-chip companies in strategy, controlling, business development, product development, mergers and acquisitions, and turnaround operations. I’ve observed that as business managers, owners, customer service representatives, grocery store managers, hotel managers, caterers, bartenders, entertainers, product developers, manufacturers, distributors, service providers, etc., we are constantly being pushed to ask ourselves:

• Who are our customers? What are their needs, wants and demands, and are we meeting them?

• Are we retaining happy customers? Are we properly recognizing them?

• Are there quiet leavers that leave our portfolio and take their business elsewhere without telling us why?

• Are we properly engaging with challenging customers in order to make them happy customers? What does that process look like?

• Can we engage with unreasonable customers to convert them into challenging customers and, eventually, into happy customers? Or do we respectfully choose to disengage from the unreasonable customer?

• What are we doing within the organization to understand our customer base and develop strategies to better serve them? Is everyone in the organization engaged and aligned to do so?

If we’re mindful of the above questions, consider things from our existing customers’ perspectives, and challenge our own organization to meet and exceed our customers’ expectations, we should be able to develop stronger customer relationships and drive real value for our organizations.

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