How To Avoid Bad Customers
Regardless of the size of your business, big or small, as you work through your business journey you encounter customers or clients who are not a good match for your business. As lawyers, we know that Terms and Conditions are an essential tool for managing customers’ expectations, particularly those difficult customers, that every business at some time or other will encounter.
When working with a new customer, it can be dangerous to make assumptions that everything about the transaction is clear and that everyone is on the same page in regard to expectations. As lawyers, we find that very few people actually understand what goes into what we do and as a result, we do need to explain our process and educate our clients as we go. If your business does not have Terms and Conditions that outline clearly what you are obliged to do and when and what the customer is obliged to do and when the chances of a disgruntled, or difficult customer dramatically increase.
No business wants an influx of disgruntled customers, you probably already know that they can adversely impact productivity and staff morale. This article will discuss how sound Terms and Conditions can help to manage customer expectations and reduce the likelihood of creating a bad customer.
Bad Customers – Who Are They?
Former Executive Director of Goldman Sachs, Greg Smith, published what can only be described as a scathing essay of resignation in The New York Times, accusing his company of unethical behaviour and ripping off clients. It was, however, his proclamation that the firm’s clients were “Muppets” that was perhaps the most outrageous statement and a statement that caused the most controversy. I mean, what type of business calls their clients or customers “Muppets”?
Mr Smith’s “Muppet” label may have been highly inappropriate, and while most businesses would not publicly use such derogatory terms when describing their customers, most businesses at one time or other have difficult, rogue, unruly or downright crazy clients on their books that they are forced to deal with. These clients make businesses difficult and they make less rewarding both in enjoyment but also financially. They challenge processes and test out the effectiveness of policies and procedures. They are downright painful. But are they avoidable?
The answer to that is yes! It is certainly possible to avoid a Muppet customer. The responsibility for avoiding the creation of these types of customers lies entirely with businesses, with the easiest way to achieve this being through the use of Terms and Conditions, to manage client expectations once they have agreed to do business with you.
Terms and Conditions – Why Are They Important?
Terms and Conditions are essentially the legal basis on which a business interacts with its customers. They provide the more intricate details about the provision of goods or services and answer all of the questions that may not be clear to a customer initially. Most importantly, Terms and Conditions create a clear, legally binding contractual document.
Terms and Conditions from a business perspective are a vital part of day-to-day operations, and any business that does not have proper Terms and Conditions in place leaves themselves open and vulnerable legally. When I say proper Terms and Conditions, I do not mean 4 dot points you wrote or your competitor’s terms that you copy-pasted when you got your first customer to say yes to do.
Most of the common inclusions in Terms and Conditions are:
What the customers’ obligations are to the business (such as payment terms for example);
What the business’s obligations are to the customer (such as delivery times); and
What occurs when there is a breach by either side.
It is this setting out of a business relationship that is essential in terms of establishing a sound relationship with your customer.
Managing Expectations
As Terms and Conditions set out the rights and responsibilities of both the business and the customer, they serve a pivotal function in managing a customer’s expectations.
Customers more often than not only remember two things about their dealings with a business – the beginning and the end! A business can give a customer the best middle experience in the world, however, the customer will only remember their initial interaction with the business, and how they felt at the end.
Setting out the details of the transactions, in clear, transparent terms at the commencement of the transaction, through the use of Terms and Conditions, enables the customer to have a clear idea of what is going to happen and when. The customer should then feel more at ease throughout the transaction, which facilitates a greater possibility of fewer issues arising and a greater chance of a positive ending. Therefore, less chance of a Muppet customer.
Muppet customers will always exist, and many customers never even bother to read the terms and conditions prior to signing them. However, having a legal contract in place certainly protects a business from any adverse behaviour of the customer, and provides a document that can be relied upon in terms of seeking recourse, in the event that there is a breach of the Terms.
No Terms and Conditions can protect your business if your customer onboarding process is not right, you can certainly use a sound legal framework to help protect you but your business nous will develop and policies will develop about who is a Muppet in your industry and once you can avoid even getting them into your sales funnel, your enjoyment of your business and your team’s enjoyment will increase exponentially. About 2 years ago at You Legal, we decided that we only act for nice people – which has improved everyone’s experience of working for the practice. It is true that sometimes people slip through the ‘nice person’ radar – but we are getting much better at only acting for people who are a great match for our team.
Ultimately, Terms and Conditions are vital to any business, and businesses regardless of size should ensure that they have in place sound, individualised policies to assist in managing their client’s expectations and decrease the likelihood of a Muppet customer.
QUESTIONS?
Contact us if you would like to have more information. Our lawyers at You Legal will be happy to assist you in whatever way we can.