It’s common knowledge that “the customer is always right”, isn’t it? We all know that’s not quite true, but what happens when the customer is not only wrong, but they use their influence to push a company in a direction that’s actually a net negative, leading to worse products and less revenue?
This kind of customer is really nothing more than a bully, willing to use whatever leverage they have to get what they want — whether that’s financial power, influence with the company’s leadership team, or direct threats of retribution and negative reviews in the future. The bullying customer is a real concern for many companies, particularly smaller or growth-stage companies who have an outsized interest in maintaining one or two customer contracts simply in order to keep the company afloat. But there are steps that we can take to both insulate ourselves from the influence of a bullying customer and to deal with them when they rear their ugly heads.
What to Do Before the Bully Strikes
The first and most important thing that any company can do to avoid the influence of a bullying customer is to keep a close eye on what your customer portfolio really looks like. It may be really tempting to sign a gigantic deal, and it certainly looks good to your investors — but it also places your company at a significant risk. That customer can use such a financial position to unduly influence your product roadmap. After all, we don’t want to be a custom development shop for some particular customer — we want to create a product that solves actual, valid market problems, so we can grow and expand.
This primarily means maintaining a healthy, diverse customer portfolio — some small fish in the market who will grow with you; some medium-size growth companies who are established enough to be influencers; and a handful of large companies who can provide name-brand validation without much more effort. We need to balance all of these such that, if we were to lose a single large company contract, we would be able to rely on our smaller and medium-sized contracts to cover the loss. Now, this doesn’t mean that you need to support everything from small business to full-enterprise, but within your market segment, you need to have more than just one or two whales within your company portfolio.
Ultimately, the best defense we have against having a bullying customer waiting in our midst is to work closely with our sales and marketing teams. Make sure that they’re aware of the risk that such a customer poses to the company and the product as a whole. Incentivize your teams based not just on how big a fish they can land, but how the customers they do bring into the pipeline provide opportunities for true growth.
Recognizing the Bully
It’s almost inevitable that every company will eventually wind up facing a customer bully — it’s par for the course in more cut-throat industries. But how can we know when we’re facing a tough negotiator versus a customer who’s actually trying to bully us? There are a few telltale signs that we can keep an eye out for, most of which aren’t terribly difficult to identify.
Some common characteristics of a customer bully include:
- Their contribution to a company’s revenue is outsized in comparison with other customers, and they are aware of this;
- Their size, scope, and scale of product use or integration is larger than the average customer, so they push boundaries even in “normal” use;
- They are well-known customers in the market, whose mere attachment to the company brings intangible goodwill and market engagement.
Of course, these characteristics alone aren’t necessary to consider a customer a “bully” — there are a great many companies out there who look like the above, but who demonstrate a reasonable understanding of the buyer/seller relationship. To really identify a bullying customer, we have to look beyond their mere characteristics and into their actual behavior:
- They demand discounts up front based solely on the goodwill that their name will bring;
- The ignore discussions about how their needs may exceed the normal offerings of the company or product;
- They initiate support requests directly with sales and senior executives, rather than following standard support pipelines;
- They demand specific features or capabilities that suit their needs, but which may not be generally applicable to the market;
- They fail to pay their bills on time, and find excuses to withhold payment until some set of demands of theirs are met;
- They threaten the sales team and executives with cancelling or not renewing a contract unless they get specific deliverables outside your product roadmap.
The key to identifying a customer bully is their use of threats — either overt or intimated — that they will go somewhere else if you can’t meet their needs. This threat is, unfortunately, all too often successful; the loss of a major customer can cause severe financial and publicity consequences. But I would posit that keeping a customer bully around and kowtowing to their requests quarter after quarter results in far more severe consequences for the company and the product — the costs of diverting development efforts, dedicating support personnel, placing specific sales and marketing resources, and generally bending your company to the will of one customer.
Listen, Assess, THEN Act
However, we can’t afford to jump to the conclusion that a customer who’s a hard negotiator or who likes to throw their weight around is such a bully that we cannot afford to keep them on our books. Rather, identifying a potential or actual bully allows us the opportunity to engage in proactive management of the relationship, rather than reactive responses that weaken our company and product as a whole. This means that we have to take a structured approach to such circumstances — we must listen, then assess, and only after that, take action.
First, and most importantly, we need to actively listen to what the customer is telling us. This means collecting and analyzing all communications that we have with that client — from the executives to the frontline support teams. We need to dig into the things that they are not telling us, analyze what we’re hearing from different places in the organization, and understand from top to bottom where the issues actually lie, and where there are disconnects between what some of their contacts think and what others are experiencing.
Once we’ve collected all of this data, we need to carefully assess it. Some common questions that we should ask ourselves:
- Is the threat of them leaving a real one — how much have they invested in the product and what are their switching costs?
- Is the feature that they’re asking for really a one-off piece of work, or can it be generalized somehow so that it meets not only the one customer’s needs, but the market’s needs as a whole?
- Are they responding to promises that were actually made to them at some level of your organization, or are they creating expectations on their own without any backing in actual discussions or commitments?
- Did they start pushing the boundaries of the product from the beginning, or are their issues more recent?
- Is there anything that can be done from a process or communications perspective with lower cost to the organization that can make the customer happier with the product and company?
All too often the inclination is to simply react — but instead we must think about how we want to respond to such situations, and only after considering all of our options and all of the permutations of root cause, do we make such a decision. It’s often sufficient to satisfy a bullying customer simply by changing the manner in which they engage with you, and making them feel a bigger part of the process while only slightly altering the actual delivery. And sometimes we really do need to divert resources to make someone happy — but we should only do so after assessing all of the other options, including firing the customer.
So, you’ve run into a customer who’s trying to bully you, you’ve listened to what they’re telling you both directly and indirectly, and you’ve made a decision on what to do. Now you’ve got to figure out how to handle the fallout from that decision…
If the customer decides to stay with you, you should have collected sufficient information to monitor the customer. This could be anything from simply querying support tickets a couple times a month to assigning a support or service representative to work directly with the customer. Keep an eye out for warning signs of bullying behavior. If we wind up keeping a customer who has a history of bullying, we need to be careful about feeding and rewarding that behavior — the more we give in, the bigger the requests are going to be.
If a customer leaves, you’ll need to find someone in the market who can fill the gap that they left and run a post-mortem analysis on what happened and what can be done better next time. There will likely be incredibly high emotions in this situation, since the loss of such a customer almost inevitably causes a loss in revenue. But what we can do as Product Managers is to base the conversation in rational, data-driven discussions which are focused on what we can do better in the future – not what went wrong in the past.
Regardless of whether a specific customer stays or leaves, however, we need to be aware that there’s never just one bully out there and keep our radar active for any possible future bullies who might come out of the woodwork. We need to ensure that the company, the executives, and in particular the sales and marketing teams are aware of the risks that these bullies pose in the future as well as the present.