Headache-inducing business relationships aren't always destined for splitsville. Matt Sarkees, who analyzes customer value management as an assistant professor of marketing at Penn State Great Valley School of Graduate Professional Studies, spoke with U.S. News about the benefits of communicating with troublesome clients. Excerpts:
You say relationships can go sour when the customer doesn't understand the idea of "mutual value." Why is this?
You have a situation where because a customer pays money for something, there's a higher level of expectation for the actual value they're getting back... The company really needs to educate the customer as to what's the value of the relationship. In that regard it will help set better expectations for the customer. The customer can say, "OK, this is what I'm paying for, I understand that, and this is the value I'm going to receive for my money."
Is raising prices a way of salvaging a relationship with an unprofitable client?
Raising prices may be just one outcome of a frank discussion of what constitutes "mutual value" in a company-customer relationship. Other outcomes include, but are not limited to, changing the services or products that the customer receives, changing the quality/quantity/frequency of those services or products, altering the mix of employees who service the customer, or changing the method in which the customer interacts with the company—for example, moving a customer to online customer service instead of assigning a dedicated account manager.
What are the biggest mistakes people make in terms of cutting loose a customer?
A: They may like a customer on a personal level and they feel bad about having to divest that relationship, and so they don't and it just becomes a problem. The second thing is they do off-the-cuff calculations and make some sort of determination a customer is unprofitable, but they don't understand why the customer is unprofitable. They don't go to customer X and say, "We have this relationship. You buy this from us, and here's what we're thinking—here's how our numbers work. What can we do about it? If we value you as a customer, we'll find a way to work it out."
Third, companies don't have a process in place. They need a process inside the company that gathers and digests information so you can communicate that information back to the customer so [both parties] can come to a decision together about whether or not they should carry on.