3 Reasons the Wrong Customer is your Worst Nightmare

May 04 2016 0comment

We’ve examined churn in a few previous articles, both what it feels like to your customer and creating the conditions which make it impossible. But if we really want to eliminate churn, we need to look at one of its primary causes: boarding the wrong customer.

In the previous article we discussed the concept of the Ideal Customer: they are ‘ideal’ because they represent our ultimate goal once we achieve Product Market Fit (PMF). Minor deviations from this ideal are to be expected, but major departures are to be avoided at all costs. We learned from our previous foray into churn, that the boundary between your Ideal Customers and those who aren’t is fuzzy and always changing. If your customers find that they’re investing a ton of efforts into making it work the way they want it to work, that tells you one of two things:

  • You need to examine additional use cases. This is a huge step and should not be undertaken lightly, since it will mean a significant investment of time and energy from everyone in the company. Sometimes this represents an incredible opportunity to capture a new market segment, but more often than not…
  • That customer is not a good fit

The closer you are to achieving PMF, the greater the investment of time and energy required to expand your products’ capabilities to novel use cases. More often than not, you’re dealing with the Wrong Customer and it’s a horror story just waiting to happen.

You Bend Over Backwards… for Nothing

The warning signs start early. Perhaps your new customer’s expectations of what the product can accomplish don’t mesh with reality. Or perhaps the economic buyer made the decision to move forward without a clear understanding of their end-users’ needs. Somewhere on the journey from prospect > qualification > customer, there’s been a communication breakdown. Suddenly Customer Success finds it extremely impractical (if not impossible) to keep the promises their new customer has embraced.

Boarding the Wrong Customer leaves everyone on the team feeling incredibly frustrated, since nothing they do seems to help them achieve their business goals. This is a huge drag on morale and makes it difficult for Customer Success to address more pressing challenges… such as examining Net Promoter Score (NPS) survey results and monitoring up-sell opportunities for good customers.

If they really are the Wrong Customer, there’s no sense waiting for them to become Ideal. They came into the relationship with certain expectations, and telling yourself that you’ll make major changes to meet their needs ignores all your best customers. The alternative – telling them their expectations were misguided – is akin to firing yourself.

Instead, the relationship festers, like a zombie. They’re like the annoying guest at the party that everyone thinks was invited by someone else. So, what do you do? Communicate with empathy, and do all you can to be strategic and pro-active. Anything less would only come back to haunt us later in the form of negative testimonials. (Though really, any testimonials they submit will probably be negative anyway, since we couldn’t help them achieve their business goals. The more we can do to offset this, the better). Yet at some point none of this matters and that customer will churn. When they do, ask yourself these two questions:

  • How much happier am I now compared to the day they purchased our product?
  • What can we do in the future to prevent other zombies from interrupting our workflow?

All that Time You Spent? Gone Forever!

Every moment you spend worrying about how to help the Wrong Fit Customer? That’s time you’re not spending on good customers, the ones who really need your help, the ones who will be with you (hopefully) for years to come.

And it’s not merely your own time, it’s the collective momentum of your entire company. Anyone who has anything to do with that account, whether directly or indirectly, will experience the friction of unmet expectations. Actually, there’s a name for this ongoing hum you hear in the background. We call it ‘work,’ and it’s an awful tragedy that we spend 10, 20, 30% of our time “managing” relationships that we should have bypassed in the first place. What would your work be like if everyone in your organization – from Executive Leadership to the front lines – had an understanding of your Ideal Customer that was both intuitive and data-driven?

Creating a customer-centric organization does not happen overnight, but it’s time well-spent. Believing that the problems caused by onboarding the Wrong Customer will simply go away once Customer Success / Sales / Support / Marketing gets their act together is a symptom of faulty leadership. This approach only brings you one day closer to your organization’s demise.

Devoting your time to fixing the problems of the Wrong Customers – the zombies –  is like watching a bad horror movie: there’s very little that can redeem the experience except the hard lesson, “we should never do this again.”

Who’s Eating your Lunch Today?

While you’re playing these games with the Wrong Customer and calling it ‘work,’ your competition is doing everything right: they’re selling to, onboarding, and training their Ideal Customers, some of whom could easily have been YOUR Ideal Customers. How easy do you think it will be for you to serve those customers, once they’ve already signed with your competition?

Effort and time wasted on the Wrong Customers is made even more punishing when you realize your competition is racking up higher revenue at your expense. They’ve got their own challenges, to be sure, but if they are focused on Customer Success then boarding the Wrong Customer is no longer such a big issue for them, for the following reasons:

  • Their Customer Success team is working closely with their Marketing team to craft the best value proposition for each of their customer segments. At the same time, they’re determining which Prospects don’t have a place in any segment.
  • Information flows easily from Prospect > Sales > Customer Success. This includes everything their Sales team learns in negotiations with Prospects plus everything they deduced based on existing customers. When it comes to the handoff, their Sales team is objective and their Customer Success team is rigorous, because they realize the effects of boarding the Wrong Customer are too damaging to lean on assumptions.
  • Their Chief Customer Officer has skin in the game. When everyone in the organization is aligned with the goal of increasing recurring revenue from existing customers, and the CCO leads the Customer Success team as a distinct business unit, then their compensation will be tied to retention. In this case, it’s likely your competitor’s CCO will also have veto power over whether or not a Prospect deserves to become their Customer.

Trust me: if you’re letting all of your prospects beat down your door, your competitors aren’t.

When you and your team recognize the importance of Customer Success – of growing recurring revenue, qualified referrals, and advocacy from existing customers – then you will understand the importance of avoiding zombies, both for their sake and your own. Because in the end they’re not zombies at all: they’re just someone else’s potential customer whose needs have been misinterpreted and misunderstood.

If you’re like me, your work is far more than just a way to survive. You find fulfillment, meaning, and a value on your work that goes far beyond the material realm. And you want to share that value with everyone you serve: your co-workers, your community, and especially your customers. Focusing on Customer Success allows you to share this value more easily than ever before, because the first step towards serving your customers is determining who they are… and who they aren’t.

Written By:

Andrew Rhodes

Andrew draws upon years of strategic business consulting experience and is extremely passionate about Customer Success. Andrew is redefining the goal of Customer Success – it is not a matter of stopping churn, but of creating the business conditions in which churn becomes impossible.