Sales Management, Sales Operations 3 Comments

The Acute Pain of Closing Bad-fit Customers

Lincoln Murphy

August 15th, 2016

“If you have to close bad-fit customers to make your quota, you’re a hustler, a closer… some might even say you’re a good salesperson. But you know what you won’t be?… Working here much longer!”

When I heard the Sales VP say that to her sales org – with the CEO standing by her side – I knew that the time I spent with her and the company’s executive team going over all the ways acquiring bad-fit customers absolutely destroys everything from morale to the value of a company was time well-spent.

Sales had never known what the characteristics of bad-fit customers are or the challenges the rest of the company faces when trying to make those customers successful.

So it wasn’t the fault of the salespeople that bad-fit customers signed on, and the VP of Sales – as well as the CEO – went on to say that; they took ownership for their failures as leaders.

No one told the sales people that Customer Success is when customers achieve their Desired Outcome through their interactions with their company. All interactions. With their company.

Every interaction matters: From the first time a prospect interacts with an SDR or AE, to when they convert to a paying customer, through first value delivered, and on to adoption, engagement, and expansion over the rest of the customer’s 3, 5, 7, or 10-year+ lifecycle.

Sales is actually the front line when it comes to Customer Success.

The problem is, except for the situations in which sales is responsible for renewal and expansion, or when a customer who’s struggling contacts the original sales person for help, salespeople are generally fairly disconnected from the customer and their journey to success (or failure).

When I’m talking to a potential consulting client, not only am I responsible for closing the deal, but I also have to work with them. I am acutely aware of the negatives associated with closing a deal I shouldn’t.

But the further you get from actually working with the customer on their journey (or struggle) toward success, the less acutely you feel the pain of that bad-fit customer, and the easier it is to justify closing a customer without success potential.

And while I’ve literally heard a salesperson tell the Customer Success Management team, “I don’t care, that’s post-sales” when it was pointed out that 3 of the 5 “success potential” boxes were empty, most of the time when a bad-fit customer is signed, it isn’t an egregious act.

Why it Happens

Most salespeople don’t wake up in the morning and say “today I close ‘em all and let Customer Success sort ‘em out.” It’s just that they don’t know what makes a prospect a “bad fit.” While maybe they have an idea, it’s that distance from the acute pain of bad-fit customers that allows them to easily put the potential for the customer to not be successful out of their mind and just close them.

Most salespeople aren’t motivated only by incentives like mice or chipmunks or some other analogy that tries to reduce them to something other than human. In fact, it’s that salespeople are human that is the perfect excuse for – and solution to – the problem of signing bad-fit customers.

In situations where the negative consequences are not known for sure – like, where a higher authority hasn’t dictated what those consequences are, for instance – but could be extrapolated if given any actual thought, humans will choose to avoid thinking about the potential downside and focus only on the short-term positive. We’re really good at rationalizing.

So, if a salesperson has not been explicitly told the characteristics of a bad fit customer, why they’re a bad fit, and what the negative consequences of doing business with that customer are, the fact that there is a possibility they might not be a great fit isn’t reason enough for the salesperson to give up that sale, miss their numbers, and take home less pay. It’s an easy decision for them to rationalize.

Spread the Word

What I’ve found is that simply laying out specifically the characteristics of both bad-fit and good-fit customers works really well to keep salespeople from signing bad-fit customers. Explain what happens when someone signs a bad-fit customer, and share who feels the acute pain of those bad-fit customers.

When leadership tells salespeople who they should sign and who they shouldn’t, amazing things can happen. There’s no need for disincentives, clawbacks, or the like.

It turns out that simply knowing what a bad-fit customer looks like and why signing them is a bad idea for everyone will keep the vast majority of salespeople from signing them.

Effects Throughout the Organization

So who feels the acute pain of a bad-fit customer? Well, for starters…

Onboarding / Implementation

Bad-fit customers fail to get initial value from the product in a timely manner (if ever). I see early lifecycle issues as the reason customers cancel or don’t renew all the time.

Product

Bad-fit customers can send product down the wrong path. Product teams shouldn’t spend time adding or fixing features for customers that shouldn’t be customers in the first place.

Support

When a customer is having problems, they contact support. Bad-fit customers contact support a lot, but their problems are not resolvable, hurting the performance metrics of the support teams.

Account Management

Expansion and Renewal require success; bad-fit customers have no success potential. AMs with target metrics are more susceptible to failure when you sell to bad-fit customers.

Customer Success Management

Bad-fit customers will not achieve their Desired Outcome, which is the whole reason the CSM org exists, thus setting them up for frustrating failure.

Shareholders

Bad-fit customers are a drag on growth. They waste resources and cause a poor reputation in the market, and that directly impacts the value of the company.

Sales

Bad-fit customers lengthen sales cycles with other prospects. They cause negative market sentiment, a lack of advocacy, and the need to overcome more and more objections. If you work for a sales leader that allows other salespeople to close bad-fit customers, it’s time to move on. They’re actively making your job harder. If you know another sales person is knowingly closing bad-fit customers, that’s not something to ignore. When you see something, say something since they’re hurting you, too.

Your Customer

More than anyone else, the bad-fit customers you sign feel the pain acutely. The customer trusted you when you said your company could help them solve their problem. They put their reputation on the line. They invested their hard earned money into the deal. And you let them down. The best salespeople can use their customers not just as references with prospects, but for their next sales position. Think about that.


I could keep going, but hopefully you get the picture.

Bad-fit customers are a drag on growth; they waste resources, hurt morale, increase negative market sentiment, and ultimately hurt everyone involved… including the customer who trusted you.

If that doesn’t jar you into changing your ways, please find another line of work.

 

About the author

Lincoln Murphy

Lincoln Murphy is founder of Sixteen Ventures, a consultancy helping companies accelerate growth through Customer Success. He's a prolific writer and international speaker on Growth and Customer Success.

  • Dave Loneragan

    What are some techniques for identifying and filtering bad-fit customers?

    • Good question. I’d love to read more about that, too.

    • Layout your last 10+ deals on spreadsheet with all the key things that happened to close the deal. Person initially contacted, Person(s) who bought, problem they had, Solution you provide/solved, technologies and/or systems you worked with, etc.

      Some of this is subjective and the rest practical.
      * Company or department size (headcount, revenue, locations, etc.)
      * Estimated customer value
      * Title
      * Current technology stack – are they using the tools you work well with
      * Sales Decision Making process
      * Buyer’s budget approval – different roles have different sign off levels
      * Time in position
      * industry or market segment
      * Physical Location

      You’d be surprised how clear the picture gets just for doing this. (and by the way each sales person should have this at any time…)

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