Tweet

But They're Our BEST Customer!

Written by: Rebel Brown

Article Overview: A strong relationship with a customer is the Holy Grail we all seek. After all, once you have a Win/Win relationship, both businesses profit, right? Sometimes, but not always.

But They're Our BEST Customer!

A strong relationship with a customer is the Holy Grail we all seek. After all, once you have a Win/Win relationship, both businesses profit, right? Sometimes, but not always.

Here's a case in point - just to show some of the pitfalls you want to avoid when it comes to that 'best customer' of yours.

A recent client had grown at 40%+ year over year and was positioning for further market expansion. This Phoenix had an envious trajectory on paper - and seemed ready to unfold its wings to soar farther and higher than ever before.

When I looked at their revenue history by customer - I noticed that over 50% of their revenues came from their top 3 customers - with the largest customer contributing over 25% of total revenue.

That's a pretty scary thing if you ask me. Call my cynical, but I've grown to suspect anyone that is known as a "best' customer and who has that much impact on your bottom line. To be fair, sometimes these type of relationships really are good for business. It's just those select few that will kill you dead.

When I asked the executives about the revenue volume attributed to that specific account - I got these big grins and watched as pride literally swelled their chests.

Seems that customer had been a huge battle with their leading competitor a couple of years back. The competitor was more than 10 times larger than my client. But my client had won the initial RFP - which was the first of many and a Huge Opportunity. Since then they had been "thick as thieves" with the customer in question.

Small follow on deals had materialized as promised. Although:

• The margins had been lower than expected.

• And yes, the customer had required custom development for each of the follow on deals - which they expected my client to cover as part of the normal cost of doing business.

• And of course, now that they had such a large deployment, they expected a special level of support that included my client's personnel on site (at my clients' expense).

• But man, they love us for all we do, and they are our best customer!

Well, it seemed obvious to me that there were soft and hard dollar costs associated with this account that might be questionable. But I let it slide - for that moment.

My client continued with the story. Seems they'd had a big problem with the installation. The client had been pretty upset when the solution didn't work as expected. My client invested man-years of investigation, but they'd finally tracked down the problem - which was in another vendor's technology. It took a while, and my client had to show the other vendor how to fix their problem - but in the end the customer was up and running and happy as a clam. And the other vendor loved my client now too - they were proposing more deals with them than ever.

Why wouldn't they both love my client? Sounded like free development, free problem determination and resolution, free coding and even free training to a vendor that hadn't spent a dime with them.

Sound scary? It gets better.

Seems the customer had the next RFP coming up for decision in two weeks - the next big step in the roll-out my client had initiated almost 2 years previously. My client's team had been on site continuously, working with the buyers and users and engineers to offer just the right response. The business was a shoe in - and for a change it was at a reasonable margin. Finally the investment in this huge customer was about to pay off.

You can guess the ending to the story right?

The RFP was awarded to a competitor. Yes, it was the vendor that was 10 times my client's size. They underbid them by 3%. And the customer switched vendors faster than I switch toothpaste.

• They'd let my client do the grunt work and break the ground on the first round of solution deployments.
• They'd waited for my client to work all the bugs and issues in the customer's infrastructure.
• They'd let them cover all the associated costs
• Then they'd swept in and taken the bigger, and more profitable, deal.

The vendor my client helped? They'd partnered with my client on the RFP. But they'd also partnered with the other vendor who won - and since their technology actually worked, well, they were guaranteed a piece of the business no matter who won the proposal.

And the customer? Well, they really appreciated all that my client had done for them. Really. But business is business and we have to go with the most cost effective proposal. You have to understand that, right?

Oh, and by the way - we still have a few things we need you to fix for us...

Related Articles
  Real Work at Home Jobs - Why Cant You Find One?
  Extraordinary Customer Service: Where Does It Begin?
  How to use customer incentives to dramatically increase customer loyalty
  How to build customer loyalty
  Tips for Improving Customer Service

Article Tags: big grins, bottom line, case in point, chests, competitor, deployment, doing business, holy grail, margins, market expansion, phoenix, pitfalls, pride, relationships, revenue history, rfp, thick as thieves, trajectory, ul, wings



Related Forum Posts
Re: Two Useful Books To Help You Focus On The CLIENT - Hi David, To add to your thread, I'd like to recommend Jonathan Tisch's "Chocolates On The Pillow Aren't Enough: Reinventing The Customer Experience". Tisch's book includes content on "Welcoming Customers", "The New Art of Customization", "The Challenges of Customer Diversity" and "Offering Something Extra to Your Customers" to name a few.
Re: Paypal process $315 million in payments per day. - I agree with you David, their Customer relations suck. This mean other payment systems like 2CO and WORLDPAY should work on their customers relations to take more slice of the market.
Re: Welcome to Entrepreneur University! - Hi Evan and GT, Can you clarify? If you join the "Preferred Customer" you are not entitled to commission? Why? This is the the $79.95/month account, I don't understand why you are not getting commission from it?
Re: Email Marketing Benefits - Robert, Many lists consist of more prospects than customers. Customer lists are the best, but they are created because prospects successfully transform into customers.
Marketers, Learn What You Can, Cannot Control Online - I am a Customer Service Representative in my company so naturally every once and a while I get angry customers fed up with my companies policies. Oh! I remember one day on my way home from school I was walking by a gas station and there was a man with a huge cardboard sign outside a small car mechanic business telling people not to go there because they are crooks. I am pretty sure they lost tons of business. I know my mama kept away from there after I told her about it. I found it pretty funny. I wonder if the guy got arrested or fined though....


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Getting The Media Attention You Deserve

Coaching Tip: Identify Your Core Values

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.