"Losing Customers on Purpose"

"Though your goal is to maximize the price increase without losing your customer, sometimes price increases can help you introduce unprofitable customers to your competitors without the conflict of firing them.

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I've found that customers who are easy to work with and highly profitable make my business life a joy. These accounts are the best fit. On the other hand, customers who are overly demanding, fail to live up to their commitments, consume my resources, and pay low prices, so that the profitability of their account is negligible, suck my energy. It's not fun to work with these customers. Far too often, though, we hang on to these soul-sucking accounts because they are large and we are afraid to lose them; or we are concerned about negatively impacting our retention numbers; or we know that we'll have to prospect to find a replacement for the revenue.

A few years back I was working with a pain-in-the-rear account like this. It was a big, nationally known brand. Exactly the type of logo you want in your account portfolio. It also generated a lot of revenue. When we first signed the account our entire company celebrated. The only problem was that the customer was killing us.

Because it was such a big company, the stakeholders were used to being the 800-pound gorillas, especially when working with small companies like mine. When they said dance, we danced even when what they were asking us to do was far outside of the scope of our contract. That's how it is when you are afraid of the gorilla. We did their bidding for a year, often working overtime and shortchanging other accounts in order to meet their demands. I hated working with them, my team hated working with them, and when I took a rational look at the cost of serving them, we were not making that much money. Certainly not enough for the hassle.

As we got closer to contract renewal time, the people on my team implored me to fire them. 

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So, instead of cutting them loose as my team wanted, I met with my contact and presented the contract renewal. I walked her through the value we had delivered and backed that up with numbers and stories. She agreed that we had done a terrific job and thanked me.

I then presented a new contract for the following year that included a 100 percent price increase. Double what they paid us the year before. She stared at the number for a long silence, whistled, and asked matter-of-factly, "How can you possibly justify an increase like this?"

"You are hard to work with," I responded, just as matter-of-factly. "The people on your team are extremely demanding, want instant turn around on tasks, and often ask us to do things that are beyond the scope of our agreement.

"Because we are a small business, these requests and demands tax our resources, making it difficult to serve our other customers. I don't see this changing, so the only way we can meet these expectations is to add dedicated resources focused on your account. We can't do that without this price increase.'

She looked down again at the new agreement and said, "You're right. We are a difficult company to work with." Then she signed the contract."