Thursday, March 19, 2009

When It's Time to Say Goodbye

There are those companies that think they should never lose a customer. They believe that customers are so important to their business that they should do whatever it takes to keep every one. There are management plaques that remind employees that “customers are what make paydays possible.”

While the general concept is true, the ultimate extension that all customers are important and that the company must do all in its power to keep every customer misses a significant point. The point has two components. The first is that not all customers are equal. The second is that customers change in value as their business changes and as your business changes.

The reality is that there are some customers that may need to be eliminated from the customer base. They will generally fall into one of the following categories:
1. Their business has changed and no longer fits your current product or service offerings.
2. The cost of doing business with them is greater than the margin you receive from products and/or services sold to them (it costs you money to keep them).
3. Your business has changed and no longer fits their business requirements.

The bottom line is that companies should be taking customer inventories on a regular basis. When the companies and customers change strategies, products, services, location or some other aspect of the business relationship, it should ring a bell that it is time to re-assess the relationship. Sometimes it will become clear that the customer is becoming more important and more resource should be directed to that customer. Other times, it just might be time to say goodbye.

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