How to break up with bad and bad-fit Customers

Hi, Markus here. Welcome to a new episode of the Customer-Value-Led-Growth Newsletter.

I share strategies and guides to help you become a proactive CSM delivering more value for your customers and revenue for your company every week.

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A portfolio that contains nothin but great customers. Customers who are a pleasure to work with because they are

• highly engaged, avid learners

• skilled and knowledgeable

• disciplined and reliable

Isn’t that every CSMs dream? The reality for many CSMs is rather the opposite. They spend most of their time desperately trying to fix bad and bad-fit customers. With very little success and high odds of burning out in the process.

While they are losing good and great customers to churn. They are missing growth opportunities because their customers with high potential for expansions, up- and cross-sells are stagnating. All because they can’t spend enough time with them.

In today’s post, I’ll show you a structured way to eliminate your bad and bad-fit customers to win back your time to invest it where it delivers a much better ROI.

1. Customer Segmentation

Let’s make this crystal clear. There’s a big difference between challenging and bad/bad-fit customers. You must not put them in the same bucket. Consequently, you must clearly define disqualification criteria.

The first criterion is to look at the financials. Bad and bad-fit customers require an unreasonable amount of help. With the costs of service exceeding what they are paying to use your product.

However, if customers are fairly new they are often delivering zero or negative margins as well. This is why we need to look at their growth potential as the second criterion. What are the odds that customers become profitable (anywhere soon)?

Your customers’ growth potential depends on 2 things:

• How much potential exists for expansions, up- and cross-sells (quantitative)

• How likely can you seize it (qualitative)

Your bad and bad-fit customers might check for the former but not for the latter because that’s what makes them who they are in the first place.

A simple, yet very effective tool to visualize your customers through their profitability and growth potential is the BCG matrix. The customers you want to get rid of are what’s labeled as “Poor Dogs”.

2. Analyzing bad and bad-fit customers

Your leadership will likely not be happy about breaking up with customers. That’s why it’s important to make it defensible when you are reporting to the C-suite. You must not take this decision based on gut feelings or personal preferences but on hard facts.

While the approach is similar, I still think it’s important to distinguish between bad and bad-fit customers.

Bad-fit customers: Do not possess the skills and knowledge to become successful, or the product was not the right choice from the beginning. They might follow all your recommendations, show up for every meeting, proactively reach out, but they are still not successful even with all the additional help you provide.

Bad customers: Could be highly skilled and knowledgeable but disqualify themselves through their behavior. They are changing goals every month, are not sticking to the plan, don’t show up for meetings repeatedly, with no excuse or explanation. This is what makes them worse - they are making a successful collaboration impossible on purpose.

The previous actions and behaviors of your customers determine whether the likelihood of seizing is significant (enough). Ultimately deciding whether there’s a chance to turn things around. This is something you need to handle very carefully.

If you have dozens of customers who need a lot of additional help despite consuming the recommended content and services, it’s likely not them who are the problem.

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