Recently I've been helping a young fellow get his first business started. At first, as with all new businesses, the customers were people with whom he was familiar. After a while, as expected, new customers started showing up - customers who were not friends or acquaintances.

Inevitably I got a call one day about a problem that came out of the blue - unnecessary, unreasonable; a waste of time. So I started to explain about The 80% / 20% Rule of Thumb which says that 80% of our profits will come from 20% of our customers. Don't worry about it! That's life.

Why?

Some people are well organized. They make simple decisions and they know how to follow through. We make most of our profits doing business with these people because we make agreements with them and, with their active and productive participation in the process, the work gets done quickly. These customers make it easy for a service provider to do good work! Not surprisingly: they tend to be very satisfied with the service they receive. As an added bonus (and this is a big bonus,) the more organized customers are inevitably the ones who provide the best references. Unfortunately the more organized customers are a bit like diamonds: valuable, beautiful and somewhat rare.

Then there are the majority of the customers. They tend to be less organized. Service providers often find ourselves devoting most of our resources to them. They often simply just don't understand that success in any project requires a certain degree of partnership and collaboration between the service provider and the customer.

What's the solution?

The inevitable question is: How do we identify the problem customers so that we can avoid them? Better yet: How do we identify the more organized customers?

Actually it's easy to identify an organized, hard-working, intelligent and cooperative customer! In a funny sort of way that's why we get into trouble. It would be great if the less organized customers were so bad that they'd be easy to spot - but, more often than not - they all start out doing business more or less in a similar manner and they all look like great customers.

Many years ago I had a customer who proudly announced that he had been studying his accounting records. He evaluated the overhead involved in serving his customers and identified the most difficult ones - the ones who chronically caused so much trouble (in some cases through absolutely no fault of their own,) that doing business with them resulted in overhead that consistently exceeded the income from the transactions. He sent them letters explaining that he could no longer do business with them and told me, proudly, that he was hurting his competitors by forcing difficult customers to call them.

It's an interesting idea - but there are at least two problems with it:

1. Customers, like everybody, are supposed to improve with time. They are supposed to take note of the things they do well and the things they do badly. They are supposed to learn from their mistakes and change the way they do things. As a result, the customers who are struggling at times when everybody else is doing well - tend to be the customers who manage to get themselves organized just as everybody else is getting into trouble! Think about it: If we get rid of them when they're causing us grief they won't be around when we need them!
2. Related and of more immediate impact is the fact that customers who cause us trouble force us to look at what we are doing and how we are doing it. They force us to identify elements of our business process that we can improve in order to reduce our costs and improve our response to problem situations. If we remove the problem without fixing it - we lose the promise that the problem (through its' many solutions) would have brought us great benefits over time.

There is one other reason why we shouldn't try to avoid difficulties: Everybody has ups and downs. There are no exceptions. Even a great customer will eventually go though a rough patch. If we drop the customers we think are less organized we risk losing much more than expected in the long-term.

Where to draw the line?

Still, there are some customers who cause enough trouble to give us pause. At what point does a reasonable person yell Uncle! and start trying to cut his losses?

There may not be an easy answer to this question. At some point, though, a relationship can become difficult. We might find ourselves thinking that there is nothing more we can do to turn it around.

I have found it convenient to divide these cases into two groups:

1. Customers who just don't understand what they're doing.
2. Customers who are headed for a meltdown of some kind.

The first group is not very difficult to deal with but the second group can be quite a challenge. The circumstances of each group are different but the business-level response will probably be the same in all cases.

I'll try to briefly describe what I've seen over the years here:

Lack of understanding

There's a certain degree of frustration that builds-up - especially in a customer - when a customer simply doesn't understand the situation and repeatedly makes simple mistakes. It can be frustrating for everybody but it doesn't have to be a big problem in business terms. We can deal with most of the trouble using simple and clear agreements and a good paper trail.

The interesting part is that this type of problem can be helpful towards our long term success. How we respond to each problem situation will determine how much we benefit from it. Customers who just don't understand (or make irrational assumptions,) can help us to find steps in our business process that can be improved or that might need to be handled in an entirely new way.

This subject came up recently in a discussion with some local businessmen. I was pleasantly surprised when they told me that they expressly write in all their contracts something like:

"Please understand that we will not do any work that is not described in this agreement. If it's not listed as a task in this document it will not be done!"

I never thought of that! To write the obvious into a contract never crossed my mind in the past. Now, for the benefit of customers who lack experience and might make the wrong assumptions, it makes sense as a useful management tool.

There was a time when computer store owners would often be faced with irate customers who did not understand what Software Piracy is. Why, they would ask, did the neighbors get a home computer with Microsoft Windows and Office for free but this computer store is charging additional fees? This is no longer a problem these days but, as an example, here are some steps that would have been helpful back then:

• Add a section at the bottom of the computer systems advertisement that specifically lists some optional software: Microsoft Windows, Microsoft Office. List also free alternatives like Ubuntu and Open Office. Remember to specify the service charge for installation, if any. (Alternatively: Some computer stores used to include the price of MS Windows in the basic advertisement and specified the price without it in a note about options at the bottom of the ad.)
• Write a FAQ entry on the company web site that explains that software piracy is wrong (and illegal.) List Microsoft Office as a commonly pirated package and include a link to the Open Office web site to demonstrate that there are free alternatives.

One customer asked me for a quote on a web-based store a few months ago. After we reviewed the quote together he asked me (in all seriousness) "Why should I pay you for this work when my friends are offering to do it for free?"

Even if a customer doesn't ask such a question - he's probably thinking related thoughts. Customers find advertisements for web hosting, for example, at $5 per month - and ask (again, in all seriousness,) why should they pay $99 per month for what appears (at least in the advertisements,) to be the same service?

These questions can be interpreted as warnings that the customer lacks understanding of the issues and needs some practical experience. Again, I have personally tried to address some of the questions in FAQ and article postings on my web sites - but we can't always count on the customer reading or believing what he reads.

In the case above I encouraged the customer to go ahead and use a web site built by his friends. Asking a customer to take his business elsewhere in some cases allows the customer to get the practical experience he needs. This makes it much easier when we try to do business again later.

There's an old saying, "If you think paying a professional to do the job is expensive - wait until you see how much it really costs to do business with an amateur." Take comfort from this! By the way: Many customers really do call back later!

Heading for a meltdown

Some customers - usually the more abusive customers - do not really try to think about what they're doing or otherwise build a relationship that can last for any length of time. In many cases these customers have a high turnover of staff and outside service providers. In many cases they don't have a personal or business Goals program or a Continuous Improvement process in place. In most cases they don't learn from their mistakes or otherwise change their behaviour or business process over the course of their lives.

Many years ago I noticed a trend: Such customers would get into big trouble. I did not go to church for most of my life and I did not read the Bible - but I got the distinct impression long ago that, for example: "abusive men are inclined to adultery and adultery is a trigger that causes serious negative karma."

But I had oversimplified what I had been seeing throughout my life. It turns out that telling small lies and abusing people in small ways are symptoms of thought process failures. I'll try to explain:

When we allow ourselves to think wrong thoughts our minds become accustomed to them. After a while, we allow ourselves to think about those wrong thoughts without any restraint. Eventually we no longer realize that there is something wrong going on in our minds - the wrong thoughts become normal thoughts simply by virtue of their frequency.

Then, wrong thinking gives way to abusive speech and, eventually, abusive behavior. It starts out as small problems and, when no correction is applied, it gets worse. After a while we find our customer (who may have been a very nice and successful guy when we first started doing business with him,) is now so irrational and abusive that we want to cut our losses and move on.

Again, there is always the hope of a correction. Perhaps the guy's wife will be able to help him, perhaps he has a buddy who can get his attention and somehow point out that he's driving himself towards big trouble. Anything is possible.

The worst thing that can happen is if the guy simply gets comfortable with a certain level of abusive behavior in his life. The guy will learn to handle the problems that he causes for himself - thereby allowing himself to think that his behavior is acceptable.

In such cases we find our relationship with this guy becomes more and more expensive. He wastes a huge amount of our time and is never satisfied with what we do for him. He doesn't listen when we offer him advice, he doesn't respond to emails, he disregards the terms of his agreements, he doesn't try to hold-up his end of anything, he keeps insisting that the product and service descriptions and service agreements don't apply to him. He wants everything either for free or for a very low price and, when we agree to give it to him, he doesn't pay for a long time or he doesn't pay at all. Eventually we hear that he's going through a divorce and, finally, his business is closed.

This is not Karma. There's no such thing as Karma. It's not some kind of thunder bolt sent down from Heaven. The one true God is the God of love and peace and prosperity - not the god of cruel and unusual punishments. This is just the natural and expected consequence of an error that begins with thinking that it's okay to abuse people in small ways. This error is the start of a long sequence of errors that eventually lead to disaster.

The men that I've met who lost their wives and children and, eventually, their life savings and their businesses were not punished by God - they punished themselves. They chose to be abusive and unreasonable - and they eventually destroyed their lives as a result of that choice.

Over the past 25+ years I've had the unfortunate experience of knowing a handful of people who went through this. It's not a pretty sight. In some cases the person involved disappeared completely - I never saw or heard from him or about him again. In other cases I've seen men change, rebuild their lives and go on to enjoy life. It's their choice.

Yes we can handle the more abusive customers - but it's never easy. It's also painful if we know and care about the person and can't find a way to get through to him.

Things to do

So what do we do when one of these customers calls? Run and hide? It's not a realistic option - they look and talk and act like other customers right up until their behavior starts to become overtly abusive.

Again: The best solution is to look closely at the business processes and the available documentation:

• Try to ensure that the paper trail is as complete as possible. (In most cases where the documentation would have been helpful - it turns out that there isn't any!)
• Make sure that the documentation ensures that the business process as transparent as possible. When there's a problem we want to be able to point back to the documentation and invite the customer to clarify misunderstandings for himself by re-reading it.
• Look at the business process as a whole and fix any problems found. In fact, it's a good idea to diagram the process and go through it as a customer would from time to time. I have found software bugs, incomplete and out-of-date documents, etc., when doing this for my own business. It's a slow and painful process but it's the most effective way to discover errors and new bugs that have found their way into web services. It's also a good way to review and re-prioritize the company goals and task list. These small problems often do not get reported as bugs. Normal customers will ignore and work-around small problems. Bugs definitely do get reported, though, when the customer needs an excuse to justify being unreasonable! Try not to give them the chance.
• Look at the business process as a whole and see if anything can be simplified. Simplifying business processes not only reduces or eliminates problems and misunderstandings - it also reduces costs!
• Lower the credit limit for problem customers. This way, when the meltdown finally hits, it's possible to just enter an adjustment in the books and continue the day with minimal regret.

Kaizen is Continuous Improvement

In Japanese the word Kai means Continuous and the word Zen means Improvement. Kaizen became a popular concept in North America largely through the Toyota Corporations' efforts to build it into the management practice in their factories. It makes everything easier over time because the day-to-day business process involves regular reviews and occasional changes.

The review process also brings a bit more clarity to the day to day issues. We can sometimes earn long-term satisfied customers by being realistic about the work we are doing and the expectations of the customer.

If we ever do have to cut our losses it's always easier after trying to make some improvement to the business process. This allows us to respond somewhat more positively to the situation. Then we can be confident that, later on, the customer will realize that we were doing good work.