Spotting a Bad Customer: When a McDonald’s Budget Wants a Texas Roadhouse Experience
Or, Why Bargain-Basement Prices Can Hurt Your Reputation
If you’ve been a service provider long enough, you’ve had the experience of negotiating with “customers who want the moon but are unwilling to pay for it.” And if you’ve been in business long enough, you’ve likely said “Yes” to one or two projects that, in the end, cost you more in time and headaches than they were worth. Whether you agreed to the bargain-basement price to help someone out, build your portfolio, get your foot in the door, or with the expectation of “more work down the road,” at some point you likely regretted saying “Yes.” Things may even have gotten ugly, words were exchanged, and the bad blood still exists today.
What’s a potential bad customer look like? He’s the type of customer who knows better than to walk into the Texas Roadhouse, call the manager over, and try this line: “Hey, listen, man…I don’t really have a budget, but I really need this. Can I get the prime rib for the price of a Big Mac? I have a lot of friends, and I’ll tell them all about how awesome your steak is. It’ll totally pay off.”
Everyone knows that’d never fly.
Yet that same customer thinks nothing of asking you to give him a 2-week dog-training program for free, or a professional photography shoot for 1/4 of what everyone else pays you for that same service. And do you know why?
Because he doesn’t see the VALUE of what you’re providing. And if he turns out to be a “bad” customer, he will hurt your business.
Tom Taulli, Forbes.com writer, writes in “Dealing With Bad Customers”:
But aren’t “customers always right”? Maybe so, but just because they’re right doesn’t mean there aren’t bad ones that drain resources. They also have an opportunity cost. That is, a business has less time to focus on top customers. Bad customers often demoralize employees because of their complaints and excessive demands. Moreover, they are often the source of negative word-of-mouth.
Service provider, freelancer, independent contractor — listen to me. Your time IS valuable. Your service IS valuable. Because the truth is, time is precious and a non-renewable resource. Every hour you spend on any project is time taken away from other people and projects — so you need to spot a bad customer before you say “Yes.”
The customer who recognizes the value of your time and the service you provide will show their understanding of that value by paying for it. Yes, you can throw in bonuses, and of course, they can negotiate a lower price. You also want to reward your loyal, valuable customers. We do that all the time! But, especially for new and untested customers, you need a minimum price in place that doesn’t budge, no matter how sincere the request. You, in return, will deliver the gold star service you’re known for. If there’s a hiccup in the project, you’ll bend over backwards to make it work, because of the value of the project to BOTH of you. Your customer will be happy, you’ll be happy, and the relationship will pay off in continued good will.
The Happy Exceptions!
We’ve done several low-budget and even free projects for causes we really believed in, for a special portfolio we were putting together, or for the experience. The relationships we continue to share with the recipients of those projects are rewarding for both sides. Interestingly, the low-budget projects that were great experiences have one thing in common: we approached them to make the offer, not the other way around. Is there something to that?
But if you’re the Texas Roadhouse, you need to own and value the reputation you’ve earned. The people who don’t want to pay for a Texas Roadhouse Experience will go somewhere else for dinner. But because you’re so good at your niche, when a customer is ready for a Texas Roadhouse Experience, he’ll come with cash in hand, or maybe even put it on his credit card — because he sees your service as valuable. You’re worth it.
You’ll give him exactly what he came for, and he’ll tell his friends all about you, in glowing terms.
Now that’s the kind of customer you want to keep!
How do you spot a bad customer, and what safeguards have you put up to prevent them from hurting your business?
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While trying to build my portfolio I’d offered a woman a free branding consultation and because she had a small budget, I offered to do a website for her for $100 and host it through my own server. We started discussing her website and after I’d spent about 8 hours on the phone with her for free talking things through, I told her I’d need a $20 down payment to continue moving forward and start designing the website. At that point she got offended and said that $20 was too much and that she felt $100 was too much for the website as well. I immediately told her I wouldn’t be able to have her as a client any longer. If she’d seen the value of a website, she would have been ok paying me for my time and effort. A bridge was burned, and I regretted all my wasted time, but it’s a lesson that stuck with me and I never made that mistake again!
Oh, Ashley, we’ve all been there! That’s exactly what I’m talking about. When we were starting out, we all had to take really low-budget projects to prove ourselves. Unfortunately, those low-budget projects can hurt us, too.
$100 was too much for a website? I’m shocked. Sounds like she was planning on getting it for free the whole time, and stealing all your creative ideas and advice as well, since you gave her 8 hours of consultation without any money down. A real con artist there. Do you ever look her up online to see if she ever got her website built?
I did google her and the best I could find was a poorly thrown together blogspot site. Something tells me that’s the level she will stay at until she learns that a good web presence is an investment.
Ashley, we’ve seen the same thing with clients who wanted us to provide more than they could afford. They’ve never ended up getting what they wanted from anyone else, either. I feel bad for them, though. I wish I could say yes to everyone!!
But as we’ve agreed, every time we say yes to one project, we’ll have to say no to another. We need to learn to see our time as a form of currency. We’re trading, really – our time and talent for someone’s hard-earned marketing dollars. The exchange needs to work out for both sides, if not monetarily, then in value. We have done low-budget and free projects, gladly, and had wonderful experiences. But we’re careful about the criteria we use to choose the projects.
If my expenses are $4,000 a month, I can’t take on 5-hour projects that pay $100. The numbers don’t add up. I either have to cut my expenses, charge more for that service, provide that service to only select customers, or not provide that service at all.
At the same time, I’d better be able to provide the value I say my time is worth. When we overload ourselves with low-budget, high-demand projects, we’ll end up giving $100 attention to our premium customers who are paying $1000 and expecting at least that in value.
I do completely understand the predicament of having a need, and discovering that getting that need filled is out of my budget. That’s why we work with customers to provide alternatives, while protecting our business.
Oh man. I think EVERY business owner in the service industry has experienced this. I know I have. What’s worse is when someone wants more like Morton’s Steakhouse steak for the price of a Big Mac. Ouch.
You’re right – it’s all about providing value. If someone doesn’t think my services are worth it, then fine. They can find someone else who fits their budget. I’ve learned that when you try to lower your pricing just to meet someone’s budget, you’re just going to have problems.
I think this is why we ought to publish pricing (for what we can) on our websites. Why hide it? That way, people know what they’re getting into before they call. I’ve done that with a couple of products, but I think I’m going to do that with more stuff. That way, it saves me the trouble of spending time on the phone with someone who is going to have sticker shock when I tell them how much it will take to redesign their website.
“I’ve learned that when you try to lower your pricing just to meet someone’s budget, you’re just going to have problems.
I think this is why we ought to publish pricing (for what we can) on our website…”
I agree, Laura! If you want to save time and energy for the projects you’ll definitely be working on, you need to find ways to get right down to business with the customers who are truly your target audience. And the way to do that is to let them know before they even call whether you’re a Kia, a Mercedes Benz, or somewhere in between.
Interesting vision came to mind, going, “Well this IS Deliberate Ink, you know,” in response to customers who may have mistaken me for their nephew, who was a journalism major but now reviews video games.
Shakirah, now THAT is a great comeback! Thank-you for sharing that here.
We need to see our own brands through that lens, too.
John Falchetto had a great post about this – he says if people complain about your prices to RAISE your prices. I love that idea!
Jenn, that reminds me of something I heard a while back:
Know who you are, so you’ll know who your target market is. Are you a pickup truck or a Cadillac?
The gist of it was, if you’re a Cadillac, your target audience is the Cadillac audience. Let the pickup truck audience go. Don’t worry about them. They’re not your audience.
Wise words.
I’ll have to track down John’s post and see why he said that! Bold move!
http://expatlifecoach.com/expat-entrepreneur/what-your-worst-client-tells-you-about-your-expat-business/ found it!
Love the car analogy – personally I’m an Aston Martin :)
It’s champagne tastes on a beer income Michelle, wanting the stone soup to taste like lobster bisque. I shared a video on Erica’s blog that I’ll DM you, about the vendor-client relationship something I know all too well. Read something today that mentioned how Apple doesn’t play that game; their products are what they are, they’re sold at retail. Shop for PCs sometime and you’ll be playing the ‘bargain hunting’ game.
The time argument — and I have it w/ myself constantly — is tough because we sell our ideas and our time and yet, it’s the expertise and knowledge that make it what it is. So what if I managed to nail the logo design or concept for a campaign in a few hours; the results, the returns will benefit that company for years. Education, experience play a factor, so we can actually save a client time and money on some projects.
My warning signs: when a SMB starts showing me global brand websites, think it’s a week’s work and that they can afford it; when they want to ‘pay by clip’ or want spec work; when they hear the cost of ads and realize, they can market at that level. Like Erica and Neicole, I am working on not pursuing those leads, finding ways to say No, stick to my gut. FWIW.
Davina, I do love the way you write. I think I’d know your style anywhere, especially with your signature FWIW! Love it.
How do PR folks structure their prices? Hourly? Campaign-based? A fee schedule?
Thanks Michelle glad you like my style. There’s more BTW, on my latest post – kinda related here. Pricing varies, project or retainer, some hourly.. I’m working on getting better at that or like others, saying ‘no thanks’ and not pursuing some business, hold out for what’s better for everyone.
Michelle,
Such a good and timely topic for me! I’ve been in a transition over the past 4 months of getting rid of those types of clients who don’t fully understand the value I provide (shame on me for allowing it!) and yet completely expecting the moon for pennies, rather than dollars. I love the Texas Roadhouse analogy! Crystal Clear.
I’m now making sure that for those clients with the immediate warning signs, I give them my higher minimum. For everyone else, I have my minimum and for some, a bit of wiggle room. Overall however, I’m not budging! No way. No how.
Erica, I’m glad you’re transitioning into a healthier business model!
We’ve learned, finally, that if we’re not a huge cheerleader for a project with no budget — and I mean a HUGE cheerleader — we pass. It’s not fair to us or the customer to put the relationship at risk. We have to remember that to any customer — “good” or “bad” — their project is a big deal. They can’t see past the money they’re putting out when their expectations aren’t being met, no matter how unrealistic those expectations may be.
Perspective is everything, isn’t it? :)
Thanks so much for commenting on our blog!
Unfortunately at my company I no longer have the authority to turn away bad customers, and the new management does not understand what I mean when I suggest we just trim the fat. “really that customer wants to quit, let them, look at this history they have never been satisfied and drain all technician’s resources and will to live” “NO We paid for that customer we can’t just let them go!”
On a side not, I really want a loaded baked sweet potato from Texas Roadhouse now.
Dan, how cool to see you here!
Any time a customer is draining the technician’s will to live, it’s time to take a look at who’s more valuable to the company. Unfortunately, in this economy, the employer is probably seeing the bad customer as more valuable than the weary, resentful technician, who has 100 people waiting in line for his job.
And that is horrible.
(Side note reply: Ever tried the fried pickles? Ohmyword.)
You raise an excellent point, in that customers often seem to mistake a less tangible service, like freelancing, for something without as much visual value as what you can purchase on the spot. I think it’s difficult for a lot of small business owners to really comprehend of the value affixed to what they’re paying for when they seek out content writing or social media services, because, unlike a Rockin’ Rancho Ribeye at the Texas Roadhouse, the results of the purchase are measured in less quantifiable ways.
That said, it’s CRITICAL for those in our business to realize and actualize the value of our own brand. If we believe in the quality of what we’re offering, than customers, however haggle-oriented, will have to accept the quality of what they’re investing in.
Emma, yes, yes, yes! Do we see the value of our brand? And what message am I conveying to my customers and potential customers about the value of my brand?
I understand why customers would want to get as low a price as they can, but at the same time, if you price too low, the perceived value of your brand is diminished in their eyes, no matter what the actual value is. And that sets you both up for a fall.
Well said Emma. If you’re selling a blender and you set a price, people take that as the price for the blender. If you’re selling a service, people somehow think that it’s “only” work that you’re doing, so surely it’s negotiable.
We’ve certainly had our share of these. The worst for us are when we’ve taken on projects for people we knew, as semi-favors. It puts you in a very uncomfortable position. I can think of one person who still owes us money…
We learned the hard way that it is important to evaluate the customer at the same time they are evaluating you–and make a decision as to whether this is a customer you want to work with. Sometimes you can tell that this person is going to expect everything for nothing, so you’re better off letting them be someone else’s problem, I mean client. Other times we have turned away clients because we didn’t like the nature of their site (seemed like a sham or it was a porn site). Do we lose money? Maybe. But our peace of mind and integrity are more important.
Neicole, the projects for people we know are really difficult to negotiate or turn down! I just remember this: there is no shame in having boundaries, and “good fences make good neighbors,” even (especially?) in business.
We’ve seen some bridges burned over the years because we said yes to “friends” with no budget, who ended up having unrealistic expectations. Amazing how quickly things change! The broken relationships are what bothered me the most; it’s just not worth it.
The best policy is to learn to say, “I don’t have the free time to invest into this project the way you may want me to, when you’re not able to pay for my time and expertise. I value our relationship, and think it’s best we pass on this project.” Then refer them to someone who needs projects for their portfolio, and will work for pennies on the dollar. (We all started out there!)