Fly Someone Else

By Joseph Greco, MSOD

The lifeblood of any business is attracting and keeping customers. But they must be profitable and they must fit into the strategic plans of your company.

As difficult as gaining customers may be, especially in these challenging economic times, sometimes we need to get rid of a customer for the assurance of our firm’s future survival and success.

You may even need to jettison profitable customers. Here’s a case in point. Years ago, the Skil Company, maker of power tools, decided not to continue to sell to Sears. While Sears was a major customer and profitable, Skil determined that selling to smaller retail stores would enable price increases and lead to even greater profitability. The change in marketing took a few years but resulted in hundreds of millions of dollars of more profitable business.

Any one company cannot be everything to every customer. Unless resources are unlimited, strategic choices need to be made to identify the target customer and determine the products and services to be offered. Herb Kelleher, former CEO and founder of Southwest Airlines, said, “The customer is frequently wrong. We don’t carry those sorts of customers. We write them and say Fly someone else.'”

I recently decided to stop working with a major client. After 14 months, the results were not what I anticipated. Profitability was down and my organization was devoting more resources to this one account than we could afford. I did a quick business plan update and quickly realized that, even though we delivered quality garments on time and the client told us we had done a better job than any of the previous vendors, the cost was too much. To give the proper service, it became obvious that we needed more than our entire current staff to serve this client who represented about 35 percent of our business. Our staff had become stressed, and we had one key manager and another staff member resign. They couldn’t take the pressure. The performance of other staff members regressed as well.

In addition to losing money on this account, we disappointed other profitable clients because our attention was so diverted. Those other clients didn’t deserve the poor service. So we were inverted in our strategy. We gave great service to a large unprofitable client and poor service to those profitable clients. In addition to the economic reality, it had become apparent that our core philosophy did not match with this client. They had been disrespectful to our associates, and I cannot allow that type of mistreatment no matter what the profit potential. Life is way too short, and if we can’t replace this customer then we need to re-examine the reason we’re in business. So I took a lesson from Herb Kelleher and told the customer to “Fly someone else.”

A good customer is one who values what your company can uniquely provide. That’s the start of developing a profitable and pleasant working relationship. There is no other long-term option, and we want to attract and keep clients for a long time. But unfortunately, this is not a once-and-done exercise.

Pursuing a successful strategy means continually answering the questions of what business you are in, who your customers are and what you determine to deliver to them. Firing customers is a continual process whereby successful firms have been shown to cull five to 10 percent of their customers annually. A customer is a candidate for firing if they continually complain about your prices, their personalities clash with the culture of your firm or their character is in question. If you have to fire a large number of customers, a letter may suffice. But if you can devote the time, a phone call or personal meeting would be best.

Years ago my property insurance agent fired my company. The agent visited my office and explained that my premiums were not large enough for his firm to continue to serve me. My respect for that man increased, and he is still my friend today. He even gave my son a job one summer. I perfectly understood his viewpoint and was also glad my premiums weren’t that large. I was appreciative that he handled the firing in a kind manner with a personal visit and clear explanation.

Find the courage to express your leadership ability and do the right thing for yourself and your company. You will be rewarded for making the right moves to increase profitability and improve satisfaction within your corporate culture. Consider the irony as noted in the book “The Firm of the Future,” by Paul Dunn and Ronald J. Baker, when they state that “you may find fewer customers may equate to higher profits, better service, improved morale and less complexity.” So keep your attention focused on the greater good of your company’s future success and consideration of your employee’s satisfaction by dealing with only profitable and respectful clients.

Human capital is extremely valuable, and the job of the top executive is to protect the company’s assets and deploy the available resources for the greatest return on investment over the long haul.

Joseph Greco is president of Greco Apparel.
You can visit them on the web at www.grecoapparel.com.