Just Say No
Apply now to be an Entrepreneur 360™ company. Let us tell the world your success story. Get Started »
Counter Culture Coffee Inc. is a 36-employee wholesale firm in Durham, North Carolina, that supplies organic and conventional coffee to 500 clients, ranging from restaurants and coffee shops to large grocers such as Whole Foods. But as Counter Culture co-founder Brett Smith knows, some customers can be a real grind. Three years ago, the company negotiated with a potential customer who asked for a better price and extra brewing equipment. Counter Culture gave in on both counts, but it wasn't enough. "They kept asking for more," says Smith, 42. At one point, the prospect even asked Smith to pay for an advertising campaign. After eight months, Counter Culture walked away.
Bending over backwards for customers is largely what gives entrepreneurs their edge, and in these days of personalized service and money back guarantees, overindulged customers expect they'll get everything they demand. After all, the customer is always right, right?
Wrong. There's a thin line between service and servitude, and over-coddling customers can actually be a bad business decision. "Is the customer always right? Yes, until they stop being a customer and start being a liability," says T. Scott Gross, consultant and author of Positively Outrageous Service.
Companies implement 100 percent money back guarantees and other programs because they assume very few customers will take advantage of them. Still, it's debatable what companies get in return for offering the moon. "It's questionable whether [such policies] have a significant impact on profitability," says Scott Broetzmann, co-founder of Customer Care Measurement and Consulting.
"I think in the 1990s, ['The customer is always right'] was the mantra. It's not the mantra anymore," says Valarie Zeithaml, a marketing professor at the University of North Carolina, Chapel Hill who teaches courses on customer service. How much service to provide--and where to draw the line--is a learning experience for entrepreneurs, and smart ones realize there are customers who aren't worth the trouble.
Zeithaml suggests setting a service base line that you provide to every customer, then waiting to see how customers react. Give more service to customers who like and respect what you're already doing. Sort customers into the good, the bad and the ugly, then shed the ugly.
Smith made some changes after Counter Culture's eight-month ordeal. The company started targeting customers who would work as partners, and it rolled out a set pricing and discount structure instead of negotiating prices with each customer. Smith still has customers who push for deep discounts and perks, but firm boundaries have made these requests a non-starter. "Saying, 'We will not do these things' just takes it off the table and helps you concentrate on what you will do," says Smith, who believes the changes have created more of the right type of business. Counter Culture projects sales to reach $7 million this year.
Know your limits, and make sure customers understand them, too. Says Gross, "There's nothing that says you have to love the customer [all the way] to the poorhouse."
Chris Penttila is a freelance journalist in the Chapel Hill, North Carolina, area.