The Jack Welch Rule for Startups: Fire bottom 1% of your customers!

I dont remember when I read Jack Welch’s Straight from gut. It must be 2004 or ’05. But I do remember the core of the book – his relentless thirst for excellence, his passion to make GE the best company in world, his management philosophy and his pioneering ideas.

There are several ideas we can copy from Jack’s journey to make our startups better. Let me tell you about one such idea and how I use it to fire bottom 1% of my customers!

During Jack’s tenure as CEO of GE, every year, he would regularly fire bottom 10% of his managers.

Each year, Welch would fire the bottom 10% of his managers. He earned a reputation for brutal candor in his meetings with executives. He would push his managers to perform, but he would reward those in the top 20% with bonuses and stock options.

[more on wikipedia]

Today, It might not seem like a bold move, but in 1982 it would have taken a lot of guts to even think about such a policy.

Why I fire bottom 1% of my customers

You know that I love my customers and strive to make them heros every day. All our products are designed to make our customers awesome at their work. So the thought of firing a customers seems to contradict with what we do.

Well let me explain.

Every business, no matter how big or small, has a tiny portion of annoying, nagging and irrational customers. In case of a large company, dealing with such annoyances is no problem because they have a lot of resources (customer service teams, marketing budgets etc.).

For a startup, if you want to please an irrational customer, you would have to do that at the cost of not helping 10 nice, rational customers. And that is not all. The negative energy you get from one annoying customer can make you unproductive and down for several hours or days.

But how do I know which customers to fire?

Oh there are always signs. I have a set of group of customers who I fire most often.

The haters

No matter what size your business is and what you do, you will always have someone hating you. If I realize that a customer hates us, I usually offer them full refund and let them go. It is easier to break-up than make-up when someone really hates you. For example, there was one person who bought my e-book a while ago. We have an automatic purchase process, so as soon as the payment is thru, we send an email with download link to get the e-book. But this person some how did not receive the email. So he sent an email which went like,

Hey … I bought your book, but I guess you were more interested in my $10 than book. Because I never got it. I think you are a cheater….

I replied with the ebook as attachment and apologized to him. This should have solved the issue. But he refused to acknowledge the receipt of book and instead went and complained about my business on PayPal. I issued full refund immediately. But this did not stop him either. He kept sending emails with abusive language and never acknowledged my replies or accepted my offer to call him and talk.

The free-riders

It goes like this: a prospective customer would drop an email and ask for a free copy to see if the product works. They promise that if it is what they want, they will purchase 100s of copies for their entire team. At this point, the request is quite normal. So I tell them to visit a page where we keep demo files / videos. These are samples that give a very good understanding of what our product is all about. But the trouble starts when they comeback and request for a full free copy.  A request like this from a student or unemployed person is quite normal as they cannot afford to buy stuff. But a department head in a large company? a sure sign of annoying customer.

The cry-babies

Whether you have an extremely simple product or selling subway tunnel drilling machines, you always find customers who require excessive hand-holding and attention. I think not all customers in this group require firing. But if it gets to a point where the cry-baby customer lets you not work on helping regular customers, you are better off firing the baby.

The buy-this-want-that-ers

I dont know what to call these people, so I gave them a name – Buy-this-and-want-that-ers. One of the things we try to do is provide a clear picture of what we are selling and give free demos. All our sales pages have sections like “Who should go for this?” and “What do you get when you buy”. These clearly state the benefits of the product and who should purchase them. We also have detailed brochures and videos to help our customers decide. And this works very well for 99.5% of our customers. But once in a while we get someone who thinks they are buying X when we are selling Y. Usually they email me and say “Hey Chandoo… I thought your product can do this. But it is not. Can you help.” And I usually offer them a full refund before even suggesting how Y (what they bought) can be used to do X (what they want).

Note: If a large fraction of your customers are in this group, then you should create X too.

The conditional buyers

Often we get customers who say things like, “We will buy this, provided you include a,b,c.”. Now this type of request is very common and easy to address in most cases. Examples of such easy requests are,

  • I would love to buy your templates, do you have any training videos to help me use them?
  • I would love to join this course, but I cant finish it 6 months as I have a busy assignment / personal thing? Can you extend me for few more weeks?
  • I would love to attend your workshop, but I may need some orientation material before attending.

All the above have obvious yes answer with some easy solution. But once in a while, we get requests like,

  • I would love to buy the templates, can you visit our office and conduct a free training on them after purchase?
  • I would love to join the course, can you also solve my work problems?
  • I would love to buy this, but can you heavily customize it so I can use it for my work?

My usual answer to these is NO. I say YES only if the number of licenses / purchases is large or there is a possibility to learn new things.

Various ways to fire customers

We do not want to hurt others, thus firing can be an unpleasant experience both firee and fired. Let me list down a few tactics I use to fire customers.

  • Discourage them from buying: This is easy, especially if the customers are in groups other than hater group.
  • Refund: This technique works well, especially for haters. My philosophy on this is simple. If someone hates you, do not have them more reasons to hate you. [related: when a customer refund leads to love]
  • Ignore: Just ignore haters and naysayers.
  • Say no: Especially if someone wants to negotiate or asks for free stuff. Tell them that you have 100s of customers who pay in full and it would be unfair for them if you offer free stuff or give un-reasonable discounts.
    • Note: If you are dealing with corporate clients (who usually buy lots of copies), then negotiations and discounts are a must.
  • Block them: The last resort. If someone absolutely hates you and wishes nothing but your total failure, just block them. You can block their IP address, email IDs so that they cannot purchase from you or reach you. You are better off focusing on your mission that one person trying to sabotage you.

Do you fire customers?

Fortunately, 99.9% of my customers are nice folks who want to learn, use and benefit from our products. Many thanks to them, I go months without a single negative experience. But when there is someone really annoying, I do not hesitate to fire them and move on.

What about you? Are you saying YES to everyone or screening your customers to serve them better? Have you fired a customer recently? Share your story in comments.

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