Hey, Don’t Do This: Raise Prices to Get Rid of Unprofitable Customers
So, you’ve been looking at your list of customers and noticed that 90% of your business comes from 10% of your customers. (Forget the 80/20 rule—it’s really 90/10.) And as you dig a bit deeper, you realize that wow, the bottom half of your customer list really isn’t a good fit at all for your company. Those are the customers that only bought one job (years ago), pay in over 90 days, or—let’s be honest—really don’t buy what your company produces well. Time to get rid of them. You heard me.
You know it’s the right thing to do for your company. It will free up press time, estimating and customer service resources and make your company more profitable. AND it’s the right thing to do for the customer. It gives them the opportunity to find the best fit supplier. Agreed?
Okay, so here’s what not to do: Tempting as it is, don’t make the mistake of raising your prices as a way to get rid of them. Because if you do that, I guarantee you’ll see these two negative consequences:
1) It causes additional work for estimators. It may take the customer a while to “get it.” Meanwhile resources are spent inappropriately.
2) It confuses the print buyer. The buyer, not understanding that their business isn’t a good fit for your company, may believe that you low-balled jobs in the beginning and then dramatically raised your prices. As buyers talk to each other and discuss the printers they work with, it’s probable that this misunderstanding perpetuates a negative image of “inconsistent, high-prices” in the marketplace, causing you to lose opportunities with prospective buyers that are a good fit.
Here’s what to do:
1) Be honest. Explain to non-fit customers why the relationship doesn’t work, and then
2) no-bid future Request For Quotations.
Have you ever tried to get rid of an unprofitable customer? Let’s hear your thoughts on what works and doesn’t work.