Firing Your Customer: When Good Relationships Go Bad

Within the meetings and conference industry your customer retention percentage is a great barometer when it comes to measuring the strength of your business.  A high customer retention rate means the customers are satisfied with your venue and choose to come back again and again.  A low customer retention rate is usually a red flag indicating that customers are unhappy and are choosing to go elsewhere.  If you want to learn more about how to measure your customer retention you might want to check out this Inc.com article that gives you a formula you can use to find your customer retention rate.  I’ve seen retention rates as high as 90%, but the average tends to hover around 70% to 75% for conference and meetings venues.

However, what happens if you have a customer that books your facility on a regular basis, but requires way more resources and time for the trouble?Can you fire your customer? Absolutely, and you should before things get worse.  First, I think it’s important that we define what I like to call a toxic customer?  It is the individual or group who has become a total drain on your resources and tends to cause major headaches and stress for you and your team.  They are constantly making last minute changes to the menu or schedule that requires you to bend over backwards to fulfill their demands.  When the group leaves you realize for the amount of time and energy that you spent catering to this group, you’re actually losing money every time they show up at your front door.

Here are some ways to make sure you avoid these toxic relationships as well as ways to get out of them if you find your venue has a few customers that fit this description:

1. Define your perfect customer by identifying the person or groups that are pleasant to work with while at the same time generate the most revenue and seek out more groups that fit this profile
2. For a new customer, take the time and do some online research and contact some of the venues that have hosted their events in the past to know what to expect
3. For existing customers, refer them to another venue that may be able to provide a better fit for their needs avoiding the uncomfortable meeting where you tell them they are no longer welcome
4. Review your contract make sure the client is fully aware of your parameters, limitations and additional costs that could be assessed well in advance of them arriving at your venue ie over-time for staffing

The 80/20 rule, known as the Pareto principle and named for the economist who developed what’s formally called the law of maldistribution, recognizes that in any group, 80 percent of the results come from 20 percent of the participants. In business, that means 20 percent of customers account for 80 percent of sales, while another 20 percent account for 80 percent of problems.

Your job is to focus on the profitable 20 percent while not getting consumed by the demands of the costly few. To accomplish this balancing act, listen to the discontented so you can right wrongs wherever possible.  But for every minute you spend putting out fires, spend four minutes nurturing your most content and profitable customers. Otherwise, you’ll tilt your business toward those who may never be entirely happy with your business.  As the 50’s crooner Neal Sedaka put it so eloquently in his hit song “Breaking Up is Hard To Do.”  At least now you have some ways to make breaking up with your customer a little easier.