How to detect a toxic customer

http://www.softwarebyrob.com/2010/12/09/how-to-detect-a-toxic-customer/

by swombat • 16 years ago

293 114 16 years ago

softwarebyrob.com

jacquesm• 16 years ago

Hey, funny, I think I've had that customer too!

I ended up referring him and his company to my worst sworn enemy competitor, haven't heard from him since.

ulf• 16 years ago

careful about that, when he tells your competitor about the referal, then continues to be a major pain in the ass. They might just wait for an even bigger fool to refer back to you

TheSOB88• 16 years ago

A fool which... he wouldn't take?

spolsky• 16 years ago

This detection process doesn't detect toxic customers, it detects corporate customers at large companies.

It's fine for a small startup to cater to small startups, but the big companies have big budgets, and eventually, you'll be making 80% of your money off of them, so learning how to deal with them can be helpful.

1. Big companies often have purchasing departments actually do the purchase. They are trained to expect discounts and the people in the purchasing department know a lot more about asking for discounts than they know about software, because that is their specialized role in the organization. If you politely tell them that you have one price for everyone, they'll still purchase, because the purchasing department ususally doesn't have the power to stop the purchase.

2. Those 80-question checklists usually come out of the following, typical corporate process:

* A team of people identifies a need for software

* The team meets to agree on everything they need

* The junior person on the team is tasked with evaluating 12 possible products to see which one is best

* That person makes up a spreadsheet and sends it to each of the vendors hoping that they will do his homework for him

* The vendors who have decent presales support or sales teams fill out the spreadsheets by marking everything as "Yes" or "Yes with a footnote" and get the deal.

This also explains the "multiple questions that can be answered from a website" -- it's a sign of a person who has been put in charge of evaluating multiple products, not a sign of a toxic customer.

3. Multiple contacts through multiple channels are usually the sign of multiple interested parties at the client site. You can't sell to big companies without touching multiple people. One of a salesperson's most important jobs is helping the customer themselves get organized and make a purchase. A good salesperson helps the person who wants your software navigate their own corporate purchasing politics.

Summary: while it's fine to turn away truly toxic customers, and you are welcome to decide that you'd rather sell to the starving startup founders on Y-combinator who would rather spend 2 hours scouring your website than deal with a salesperson, the corporate customers turn out to be remarkably price-insensitive, once they make a purchase they will keep paying you maintenance for years long after the product is not even in use, and they're just as likely to leave you alone as the small guys, but they do have "multiple stakeholders" and if you want to sell to them you need a process that matches their reality.

StavrosK• 16 years ago

Well, this is the first piece of actual experience I've gotten from the web in a while, and I didn't even have to screw anything up! I have a feeling it will come in handy in the future, thanks Joel.

arethuza2• 16 years ago

Having been on both side of the enterprise sales process I think this is a remarkably insightful post. A lot of this goes to explain why enterprise software often needs to be quite expensive - you have to pay for a lot of time and effort from sales and technical pre-sales people hand-holding potential customers and helping them through their software purchasing process.

[Edit: I didn't notice who wrote that comment before replying!]

arethuza2• 16 years ago

Actually, there might be a market for some kind of tool to help enterprises gather software requirements, create shortlist of candidate vendors and allow the vendors to reply online.

dedward• 16 years ago

I would add - as a buyer (and possibly someone who's hell to a sales guy) - I usually ask to be put in touch with a sales engineer, and if he can't handle me, I very nicely explain I'd like to talk to the developers to get a feel for their product - because the devil is often in the details.

EDIT: Also worth noting - there is value in recognizing a customer you can't handle (whether or not you should be able to isn't relevant) - and then following up later to find out how things worked out for them so you can find out if you screwed up an opportunity.

ibagrak• 16 years ago

Although I generally agree with your comment, I disagree that the process only detects large corporate customers. In fact, I've seen plenty of small customers who for whatever reason act like a large corporate customer, but instead of bringing 80% of revenue end up bringing nothing more than support overhead.

These are also the guys who either slander you online or at least threaten to do so. These are also the entitled customers who tend to think you have infinite resources to throw at them. In my experience, large corporate customers were more understanding to having to draw the line somewhere than small irate ones.

patio112• 16 years ago

Star that bit about helping customers get organized (and relatedly, providing ammo for your internal champion, like PPT which he can take right into the meeting where he asks for budget to purchase you): it is some of the most important inside sales advice you'll ever hear.

paganel• 16 years ago

> Big companies often have purchasing departments actually do the purchase. They are trained to expect discounts and the people in the purchasing department know a lot more about asking for discounts than they know about software, because that is their specialized role in the organization.

My wife actually works as a senior purchaser for quite a big (non-US) oil company, and it was funny when she had to negotiate the fees with the web-design company that had been asked to implement an internal application. She didn't know anything about the technical side of it, as you well pointed out (even though I helped her out with is), but the sad part was that even her company's online department (the ones that should have known better) were quite on a different planet.

yankeeracer732• 16 years ago

Great comment. I've noticed that the procurement guys typically need to show their bosses they've gotten the company a discount. So now I just price the "standard" price column artificially high, show a 20 or 30% discount to get to the real price, and everyone is happy.

mechanical_fish• 16 years ago

My impression of the original article is that it suffers from overrationalization. The author knows, from empirical observation, that toxic customers exist. And he feels -- possibly accurately, but possibly due to the awesome power of hindsight -- that these customers should be detectable in advance.

And that may be true. But if so, it's not a scientific process. The warning signs do factor into it, but in the end it's a matter of gut feeling. (Perhaps because it's not necessarily the case that a given customer is universally toxic, it's that they don't fit you, your company, or your product.)

But it's always embarrassing for an engineer to write a blog post like "how to detect toxic customers by going back and forth in conversation, trying various rhetorical strategies that you make up on the fly, and occasionally closing your eyes and trying to use the Force". So instead the author tried to invent a nice, rational checklist. It has the virtue of looking scientific. The only downside is that it may not actually work very well. It's not what the author is actually using, either. You can't do sales, especially corporate sales, with an algorithm unless you're willing to leave money on the table, maybe a lot of money.

notahacker2• 16 years ago

Gut feeling is the only real way of separating things out.

Asking huge numbers of questions can be a sign of a customer support nightmare or a person/company/entity doing their homework. Following up can be a sign of high expectations or them being keen to make a decision asap. Asking for a discount is sometimes a buying signal. Conversely, whilst rudeness isn't a good thing, some of the customers that will be a really bad fit are the ones who are really making the effort to be polite and charming.

The one almost universal red flag would be constant inappropriate reference to price. Asking for discounts is to be expected. Asking if there are cheaper, slimmed-down alternatives, or freebies for volume purchases is reasonable. Constantly referencing the price whilst raising unrelated issues or requests is a sign that something's amiss. Whenever you hear something like "I'm surprised to hear you haven't added xyz considering you're charging £xxx" or "so before I starting paying £xxx, would you...?" it's a pretty good sign that they're either rationalisig a decision to not spend the money with you or have an inflated sense of how far up your priority queue their spending pushes you. Then again, you can suspend that rule for businesses that are likely to pay enough to push themselves up your priority queue too..

rlpb• 16 years ago

> This detection process doesn't detect toxic customers, it detects corporate customers at large companies.

For a small business with fixed pricing, a corporate customer at a large company may well be a toxic customer. All the points you made hold true, but they also all increase the cost of the sale for the small business. If the product pricing does not cover the "high-maintenance-ness" of a large corporate which is expecting a corporate service, then why isn't this customer toxic from the point of view of the small business selling the product?

OTOH, there are often purchasers at large companies who understand that they're buying a commodity product, can approve the purchase (based on the much lower price) and don't have such high expectations.

It's all about being aware of expectations and declining the sale when they don't match, which is exactly what Rob identified here.

Hoff2• 16 years ago

Similar features-checklist spreadsheets can arrive from industry analysts seeking your assistance in building their whitepaper products and various other of their comparison products, too.

Seeing the other side of those analyst annual reviews can be quite the revelation.

You can infer interesting details from what check-offs they are including, what they're omitting, from the nomenclature used, and from the check-off combinations used for specific features and capabilities.

aplusbi• 16 years ago

You've really only covered two points - why corporate customers won't RTFW and why they ask for discounts. If you are dealing with a corporation you might get contacted multiple times through multiple channels, but probably not from the same person in a short period of time.

Disrespectful and abrupt communications are still a warning sign for larger companies as are unrealistic expectations (at least for the example given).

The article specifically mentions that "Any one of these warning signs is not a big deal, but stack 2 or 3 on top of each other and (depending on their severity) you have yourself a red flag." A corporation might only set off 1 or 2, and if you keep in mind the points you made I don't think it will generate too many false positives.

notahacker2• 16 years ago

The tactless tosser in purchasing that quite possibly has been told to get some pricing options by his management by the end of the day really shouldn't cloud your judgement of the entire institution.

Even in the example blog, the problem person was eventually bypassed and the sale went ahead.

Silhouette• 16 years ago

> It's fine for a small startup to cater to small startups, but the big companies have big budgets, and eventually, you'll be making 80% of your money off of them, so learning how to deal with them can be helpful.

Perhaps, if you are running a B2B operation.

If you are a small business running a B2C operation, however, then the original article seems pretty much on the money to me.

rwalling• 16 years ago

This is a valid point. However, our product (small business invoicing software) and price point ($300) mean that we don't sell to enterprise customers. We don't make a product for this size business, nor do we have the price point to support the sales effort required.

We receive maybe one inquiry a month from a large customer and they actually tend to be some of the most reasonable prospects we come across. Very rarely do they show disrespect, ask for discounts, contact us over and over again, etc...

Though it's not critical to the discussion, the person I mentioned in the post was not a corporate customer. They were a very small (less than 5 employee) firm who happened to be exhibiting these toxic/large company traits.

dasil003• 16 years ago

Spolsky's comment is way overrated. He's only addressing the 80 questions bit. In that case you just need to add enterprise pricing to cover that sales cost. I'm guessing for a $9990 license (keeping it within a single manager's pre-authorized budget) you will feel quite happy filling in the little Excel cells for a couple hours.

chollida1• 16 years ago

Thanks for this comment Joel. This is why I love hacker news.

I was reading the post nodding my head in agreement and then I come here and the first post provides a perfect counter point to the post and explains why the blog post may not in fact be correct.

brc• 16 years ago

I think it's a little bit disengenious to post this, because http://www.joelonsoftware.com/articles/CamelsandRubberDuckie... covers this just as well, but hints in the opposite direction, viz:

"There's no software priced between $1000 and $75,000. I'll tell you why. The minute you charge more than $1000 you need to get serious corporate signoffs. You need a line item in their budget. You need purchasing managers and CEO approval and competitive bids and paperwork. So you need to send a salesperson out to the customer to do PowerPoint, with his airfare, golf course memberships, and $19.95 porn movies at the Ritz Carlton. And with all this, the cost of making one successful sale is going to average about $50,000. If you're sending salespeople out to customers and charging less than $75,000, you're losing money."

In this case, the software is lower than $1000 - so he needs to detect and avoid time-guzzling corporate buyers, even if they are likely to buy something.

Or, to setup corporate pricing. But you can't recommend the 80 question answer approach at this pricepoint.

wccrawford• 16 years ago

I totally agree with this. I'm a very customer-oriented person, but there are a few customers that just aren't worth supporting. If you can reject them gracefully, it's in your best interest to do so.

One of the problems with that is that even jerks have friends. If you reject them, they'll tell those friends and you could lose even more customers.

In this case, when they were going to have to write a custom solution for this customer, it was definitely the way to go.

As a side note, my father asks for 'discounts' all the time. He almost never gets them, and doesn't act entitled when he doesn't, but it sometimes works. So he keeps doing it. I really have to start doing it myself to see what I get.

dagw• 16 years ago

Custom solutions means consulting fees. And if it is a big company or organization you are selling to, once they've decided on you product, you can more or less make up any number you want and they'll keep paying since it is far less work than going through a new round of purchasing.

JacobAldridge2• 16 years ago

even jerks have friends. If you reject them, they'll tell those friends and you could lose even more customers.

My experience having done several client management studies with clients, is that jerks have friends ... who are also jerks. (Generalising, of course, but if you've got a solid enough business model you won't mind losing a few good clients if it means not dealing with a larger number of toxic clients.)

Best case study I did was with a branding agency. We got a list of their clients (about 100) and had the owner mark them each as Up, Down, or Neutral in terms of energy. We then had the team explore where each of the 'Down' clients (about 15) came from - half were from the Yellow Pages (again, using my experience, more price-oriented than service or quality) ... and the other half were referrals from the clients who came through the Yellow Pages!

Kisil• 16 years ago

And did you find out how many of the up and neutral clients also came from the yellow pages? That bit of information is useful only if it draws a distinction, e.g. what if the agency only had one working form of advertising?

(Of course this almost goes without saying, and I don't doubt you thought of it, but this is such a common logic error that I thought it shouldn't be left hanging in a public forum.)

kls33• 16 years ago

Warning Sign #2: Asks for a Discount (With No Reason)

The funny part about this one, is I always ask for a discount for no real reason. Even if I am only buying a single piece of software. Why, because it lets me know up front if a vendor is going to be flexible with large volume purchases and OEM arrangements.

Funny story, I was evaluating some screen capture software for OSX not too long ago for a client of mine. I was building a web app for them and part of the work flow for their content was screen capture. Anyway, I emailed a company that had a reputable product and basically told them that I had no need for the pro version, would not be using the pro version for any commercial work but that I would like to use the pro version to teach my daughter about video editing. I then asked if they would consider selling me the pro version at the basic software packages rate. I framed the story in this fashion for several reasons. I had just told the developer/owner that I would be using it for non-commercial and educational purposes both of which usually get some form of pricing plan that is below the commercial mark-up lack of having a plan to deal with either tells me that they do not have a competent pricing structure, and quite possibly that they lack a formal sales organization and negotiating deals later on would be difficult due to lack of attention to pricing structure for the various fringe purchasing needs. Dealing with companies that do not have flexible pricing policies can be difficult when you are dropping large purchases in which no one realistically pays full price per seat.

Anyways, point is be careful of putting earmarks on customers, this small developer lost a $75,000 purchase (what we set aside for a site license) for seats on his product due to the fact that he showed that he was not flexible in his pricing structure. Allowing me to purchase the pro version at the basic version price would have cost him nothing and given the purpose it was purchased under "non-commercial and educational" there was a need to reduce price to be competitive. Instead, I got a dismissive response that the basic version was good enough for my needs and that if I wanted the pro version I would have to pay full price. Needless to say, his competitor was very happy with the $75,000 purchase order.

I guess, long story short, bargain shoppers are not always bad, some people negotiate over what seem to be inconsequential amounts because rather than haggling over dollars they are finding out up front whether a relationship with your company will be tenable.

Monkeyget• 16 years ago

So you turned down a product because you failed to lie your way into getting a pro version? I fail to see how turning down a one-off for a personal request makes a company bad at handling corporate customers.

kls33• 16 years ago

I like your choice of words "lie" as if there is some moral dilemma with framing a hypothetical situation to evaluate the response of a potentially critical piece of infrastructure. As well, for the record, before you jump to conclusions with charged and disingenuous position slanting words like "lie" It just so happens that that single purchase was going to be used to teach my daughter video production. I took it as an opportunity to feel the vendor out pre-purchase.

As for failing to see that lack of pricing structure is indicative of immaturity in a sales organization I can only assume that that lack of sight comes from the fact that you either have little experience with enterprise and OEM purchasing or have never been in charge of contract negotiations, a inflexible vendor can be soul sucking. Negotiation is a big part of volume purchasing and flexibility in pricing structures is mandatory when dealing with such if there is any hope of creating a long term and mutually beneficial arrangement.

To spell it out, a organization that treated a one off request for a discount due to non-conventional circumstances is a company that shows attention to detail, and a willingness to work with even the smallest purchaser to make them happy. If I told him hey I have 75K would he have responded differently? sure he would have, but where is his breaking point when will he decide that it is not worth supporting me due to the money being in the rear-view. Conversely a guy that supports even the smallest customer is going to treat a volume purchaser very well. Judging by this particular vendors response, I saved myself years of headaches by making a small simple request and I am glad I did.

It is even more important when you deal with a small development house, I cannot tell you how many times I have seen large companies held hostage by a small vendor due to lack of maturity in their sales and customer support process. Ensuring that a potential vendor is not one of those shops is imperative to the happiness of my client and is therefore good business on my end. Vendors are free to have as crappy of sales and support organizations as they see fit, but when it comes to my organization I bend over backwards to make my clients happy and I chose vendors that align with that core philosophy.

This particular vendor was within his right to not give me a discount, I hold nothing against him and I don't hold him account for it but I am also within my right to see that as a sign of lack of maturity in his organization and take my purchasing elsewhere. The purchase reflects on the solution that I was providing for my client, and my ability to support the solution is only as strong as the weakest vendors support. I'm not betting my companies reputation on a vendor that can't even put together non-commercial or educational licensing packages much less an OEM arrangement.

samuel• 16 years ago

Sorry I don't get it. May be its me, I'm not on Sales or purchasing.

You want to purchase a large quantity of licenses, and you want a discount for them. So you ask for just one and use it as a proxy to know if the Company is flexible in its pricing? Is this standard practice?

I must say that I was at a company where the purchasing guy was always asking for discounts up front. He often tried to deceive the salesmen (for example he asked for free ISDN-GSM gateways to a telecom guy who ignored its price and thought they would cost like a phone). For him it was "just bussiness" and the way it's played the game.

Were we a toxic customer? For the naivest of our providers, sure we were.

kls33• 16 years ago

Sorry I don't get it.

My position was that a vendor that treats a small one off customer with respect and generally tries to help is going to do the same for a large purchaser. I don't expect more than that, but I do expect flexibility as this particular pieces of software would for all intents and purposes be part of my solution, it would reflect on my orginization. Having a non-flexible vendor limits my ability to be flexible, a situation I have no interest in being in. When large portions of money are involved people change, but that does not mean they will stay changed. There is a likelihood that they will revert back to their standard culture on support. By evaluating their support of the smallest purchase and a fringe case, one gets an idea of what the support will be like once the luster of money has worn off. Quite honestly if the developer had politely declined my request, I may have still went ahead with the purchase but when he took a dismissive tone, without critically analyzing the request, it became apparent that he would not provide the level of tact and attentiveness that I would need to make an OEM purchase and use the product in my solution. Again, totally his prerogative and I hold nothing against him for doing so, I expected nothing from him and did not feel that I was entitled to a discount, but I have to defend my companies reputation and vendor selection is a big part of doing so, that being said, I look for vendors that go the extra mile, because I do the same with my clients, and by proxy their ability to support their software in every facet reflects on my organization once it becomes part of my organizations provided solution.

jules4• 16 years ago

Why not simply tell the truth and ask for a discount on a large volume? Somebody gives a discount for somebody's daughter because he thinks it's nice thing to do, somebody gives a discount for large volume because he thinks that it's a good business decision. Hence, you might get your discount for your daughter, but not for the large volume.

Lying about it seems wrong and stupid.

kls33• 16 years ago

I never said I lied and please don't call me stupid, there are other sites for less than civil discourse.

og1• 16 years ago

I understand your goal is to get the best deal for your client but I think the way you test potential vendors may be a little removed to give you adequate information. Consider this company has a lot more information on the recommended path to properly learning their product. Through experience with other customers they may know ahead of time that the basic version is all that is really needed for a non-commercial user.

kls33• 16 years ago

I think the way you test potential vendors may be a little removed to give you adequate information

In this instance it worked for me, as well I do have pretty extensive experience in negotiating. In one of my start-ups I negotiated our sale to hotels.com as well with another I negotiated our sale to TUI. So I think I do have some valuable insight into negotiations and selecting companies that have complementary cultures.

To each there own, my style of negotiation has served me well and until I learn a more effective strategy it's the best game face I have.

mark_l_watson• 16 years ago

I pass on consulting work if I have any strong feelings that the customer and I are not a good fit. Many years ago, I had a potential new customer spend a lot of time telling me about the problems he had with developers, mostly that they wanted to walk from his projects. I ended up accepting work from him anyway because he was a nice guy and interesting to talk with. It took me a few months to finish promised tasks and extricate myself from his project, becoming another "walker."

I have had experience of clearly being at fault also: twice I have let myself be talked into projects in tech areas where my experience was really thin, and within a short period of time, had to notify the two customers that I was not a good fit to their needs. I was very apologetic both times and obviously did not bill them, but they were out the time documenting the tasks for me.

rtp• 16 years ago

If you are a people-pleaser (and this doesn't necessarily carry a negative connotation), then it's a good tactic for any employer to play the victim card by talking crap about previous "walkers" in order to instill loyalty. You don't want to be a "walker", do you? ;)

Actually, I think you should pay extra precaution when dealing with "trashtalking victims", because I think the risk of dealing with a toxic customer is greater than losing a bit of revenue from someone who was genuinely burned.

patio112• 16 years ago

I am convinced there exists a breed of customer who needs to feel a human is in the loop to buy something. I mean, "Yes ma'am, it does make bingo cards." has made me three sales. They're not noticeably pathological customers.

(Those certainly exist, though. Charge more, and they'll mostly inflict themselves on your competitors instead.)

steveklabnik• 16 years ago

Poor people, they've been beaten into submission by bad software not to trust even the simplest of applications...

shay• 16 years ago

/Warning Sign #1: Disrespectful or Abrupt/

I've found that people who email with no explanation or "sell" of their own but just immediate, terse requests like "What are your rates?" or "I need a copywriter. You available?" are typically NOT interested in finding the right person for themselves or their product; instead, they're looking to just outsource what they think they COULD do themselves, if only they had time/energy/desire.

People who know they're considering (hopefully carefully) how to add value to their product/life are the ones who will take the time to build trust from the beginning, will be honest about expectations, and are more likely to give the freedom and flexibility necessary to maintain a healthy working relationship over time.

brewski• 16 years ago

After poking around his site, I laughed a little after he described Emacs as a "stripped down, no frills text editor".

http://www.softwarebyrob.com/2005/09/05/better-developer-don...

SwellJoe2• 16 years ago

If I didn't know better I'd think he was trolling. He goes on to compare emacs to COBOL. I don't even like emacs (I use vim, of course), but it shows an unbelievable level of ignorance of the current state of emacs to act as though it's "ancient" and clearly inferior to the Visual Studio editor.

jff2• 16 years ago

It's pretty ancient. It's older than vi, and vi is from the 70s.

Yes, there's been some development, but using Emacs on TOPS-10 or ITS is an awful lot like using it under Linux in 2010.

protomyth• 16 years ago

I went through this process with a large company, and one of the interesting things that was done was a check with Dunn and Bradstreet (www.dnb.com). It seems they would not buy from someone without a D&B number and "sufficient" history.

kenjackson• 16 years ago

Don't you have forums for your product? If you're doing invoicing software this would make sense. I've had that for multiple products and almost all of these issues get hashed out in the forums, often by existing customers.

And in particular, if you're seeing people asking multiple questions that could answered from the website then there's probably something wrong with the site.

waterside81• 16 years ago

The timing of this is uncanny, we were just having a discussion about this internally. I've found that a great technique to dealing with difficult customers is to show them that you don't mind them taking their business elsewhere, as the OP mentions. It always amazes me at how quickly this disarms people and completely changes their attitude and approach.

And another example of toxic customers: people paying with Groupons.

hammock• 16 years ago

The moral of this story is not to detect toxic customers.

The moral is that he almost lost a sale, were it not for the other guy stepping in. The moral is that he should have asked to speak with someone else at the company to continue the selling process.

This guy almost blew it.

icey• 16 years ago

Here's a faster way of telling if you're dealing with a toxic (corporate) customer: See how they react when you say "no" to something. This is them on their best behavior too; if the reaction is nasty then you have your answer.

How to detect a toxic customer

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