Are your customer relationships built to last?
What is a bad customer? I think there’s a few different dimensions in which a customer can be “bad.”
- They’re a bad product fit or have unrealistic expectations of the product – they’re not using the product to solve what it’s designed to solve, they might expect custom development or think the product should contain features that it doesn’t
- They have disproportionate support demands – they generate tickets when the product is working as designed, want to control the product roadmap, demand immediate resolution to every issue, or generally consume far more support resources than comparable customers
- They don’t pay you enough – pretty simple, there’s not enough revenue to cover costs and get to your target gross margin
These characteristics aren’t mutually exclusive. In fact, they’re usually an ouroboros constantly feeding on each other. A customer trying to use the product for something it isn’t designed to do will almost always generate more (and higher complexity) tickets than a comparable customer using it as designed. The outsize support resources they occupy eat into gross margin as you scale and are forced to add headcount, reducing your gross margin.
Fixing bad customers starts with resetting customer expectations. While I was running customer success, we identified problem customers then conducted formal conversations with power users and decision-makers at those customers, laying out exactly where expectations had been misaligned and providing clear guidance on what to expect moving forward. We then established clear rules with our success and support teams in line with this guidance and empowered them to say “no” to many customer asks. This is simple but surprisingly effective.