318: Don’t Treat Your Worst Customers the Best
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In today’s episode of The Startup Chat, Steli and Hiten talk about why some entrepreneurs treat some of their worst customers the best.
This comes after Steli’s observation that oftentimes, large startups give special treatment to demanding and unreasonable customers while ignoring customers that don’t complain.
In this week’s episode of The Startup Chat Steli and Hiten talk about why you shouldn’t give in to demanding customers and what a fair system for customers looks like.
Time Stamped Show Notes:
00:32 Why this topic was chosen.
03:25 Hiten’s thoughts on the issue.
05:27 One way to better approach this situation.
05:59 Why you shouldn’t always give in to loud and aggressive customers.
06:50 How Basecamp approaches this issue.
07:07 How employees that negotiate better get better pay packages.
08:21 How to design a fairer system for customers.
10:04 Why you should address customer issues according to outcome you’re trying to achieve.
3 Key Points:
- I think it’s important to treat customers equally, regardless of how they are treating you.
- Your most vocal customers are not necessarily your best or worst customers.
- Just because a customer is loud and aggressive doesn’t mean you have to give in and give them what they want.
Steli Efti: All right everybody, this is Steli Efti.
Hiten Shah: This is Hiten Shah.
Steli Efti: Today on The Start Up Chat I want to talk about why do we treat some of our worst customers the best, right? So here’s the concept, here’s the thought or the idea I want to throw out there and have a conversation with you about this. I have observed this over the last few years. In my company but also in many other people’s start ups and companies. And this has bothered me for a while, it’s been in the back of my mind as an idea that’s been marinating and I want to understand it better. I want to think about it more clearly so I want to talk to you about this today. What I’ve noticed is that often times, if you think about- let’s take a company that’s 1,000 customers- some customers will be very loud, very aggressive, very demanding, the squeaky wheel that gets the grease. They will demand certain features and they will send you emails constantly, they will tweet to you constantly, comment on your blog, they will be very loud, they will create a lot of noise. And with that they will create influence, it’s going to be top of mind for you. So all of the sudden now because one customer’s very, very passionate, champions very aggressively the start up will think this is something really important maybe we should do this sooner than later. Or another example is a customer will come back and very aggressively negotiate with you and go back and forth. And push and constantly come back again and renegotiate. Usually these customers they will push your team to the limit and get the ultimately absolutely best price for your product. There’s many other examples like that. And then there are these other customers, these beautiful souls and creatures that also have features they’d like you to have and they also would like a better price if that’s plausible but they are a bit more “reasonable”. They’re nice, they’re quiet, they’re just silently and patiently waiting for you to build these features they hope to see one day or they’re hoping at some point maybe the price gets more affordable or maybe they are richer or wealthier and they can afford it more. But they’re just not as aggressively coming to you and pushing you and demanding. And so they pay full price and they don’t get the features they want immediately although they might be super loyal and really positive and really empowering and really championing customers. And I’ve seen this model in many things in life and in the world but especially in the business context, the start up concept, I find it fascinating. Some employees- the employee that most aggressively negotiates for the salary will get the best salary and the other employee that’s equally as competent and is just is nice and never asks for a raise, doesn’t get it. Why are we sometimes treating not our best customers the best, giving them the best price, them a bigger microphone and listen to them more. But do that with our worst is maybe the wrong way but I’ll allow this to customers. I’m going to talk about that and just get your reaction on this thought first.
Hiten Shah: Yeah, customers. I think it’s really important to treat customers equally regardless of how they’re treating you. So that goes for the most vocal one as well as the quietest ones. And what I mean by that is there’s a bunch of factors at play here. There’s the actual customer, and what they’re saying they need or want. Then there’s you and how you’re hearing it and what you’re asking them back to really get to the bottom of- which is often times hard. Then there’s your business and your business needs. And then there’s all kinds of other things but those three things I think are basically the way I think about this kind of thing when it comes to customers and why do we listen to the most vocal ones and not really pay as much attention to the quiet ones, etc. What we’re really trying to do is build the best product experience, the best business that we can. The best customer service we can provide our customers. And I think that what you have to is have to have a lot more balanced approach to this. And that takes a lot of work. Your most vocal customers they’re not necessarily your best but they’re also not necessarily your worst customers. Your quietest customers just keep using your products and don’t complain or anything like that, they’re also not necessarily your best customers or your worst customers. So part of it is attitude and the attitude we have is that we want to react. And that’s for that middle part of how you’re interpreting, how you’re reacting comes into play. I’ve had customers who seem very vocal who are vocal and I didn’t do anything for them except just talk to them, even though they wanted ten features. And by the end of it they didn’t want anything because I just kept pushing. And they said I need this, I need that, and that. And I said okay, tell me more, tell me more, tell me more. And eventually they convinced themselves they didn’t need any of it. I think this has more to do with the art of speaking to a customer and knowing more importantly, what you’re really looking to do with your own business and your own product and what experience are you trying to create. And making sure whatever input you add you’re not jaded by the volume whether it’s the quantity or the quality of someone communicating with you.
Steli Efti: I love that. I think in many ways this is an important lesson that’s really hard for founders to learn is that just because a customer is really loud and sometimes very aggressive doesn’t mean you have to give in and give them what they want. And a lot of times that is what’s happening is that we react because somebody seems to have authority and dominance and we feel like in order to succeed we might just have to do what they want. But the flip side of that is I think when it comes to discounting one beautiful thing that I always remember base camp saying is that we have this super cheap, super simple price so that we don’t have to negotiate with anybody. We don’t have to give a discount to anybody, I mean they might have a pre-paid annual discount that is like flat and the same for everyone. So we can treat every customer is worth the same, and we treat every customer the same. And we even limit it in a way where even as you grow at some point you can’t give us more money. So you cannot rise in importance to us in a way that’s disproportionate that would have us have to cater to a few handful of customers and be dependent on our fate, on them liking us, or them keep paying us money. I always admired and loved that they created this business model that kind of created equality within their customer base in some interesting way. On the pricing and the negotiation side I think that’s an interesting one especially in enterprise sales but also even in B2B SaaS today even if it’s not listening and building feature based on whoever is the loudest. Oftentimes companies will give a little bit of a better deal to a customer that is a better negotiator. Or let’s take another example. Employees, right? I don’t remember the study but I’ve seen many articles and studies about employees getting more raises when they’re better negotiators. Or employees that go twice a year to ask for a raise on average get more raises and higher raises than people that only ask every second year. Or I even remember seeing somewhere, I didn’t verify this, that women traditionally in the past were asking less aggressively for raises than men, and hence men were getting more raises. And so how do you design a model, how do you think about equality for customers or for employees independent from who’s most proactive or is championing the loudest or is pushing the hardest. Or who’s the best negotiator or communicator around it versus the best performer.
Hiten Shah: Yeah, a lot of times for me it goes back to the business and what are the business needs. That’s what we forget, we focus so much on individual feedback we’re getting, we don’t look across all the feedback. And then we don’t use that data across all the feedback to go figure out what the business need is. This is what happens with team members too. When you have a set of team members are you actually measuring their performance objectively? Are you actually showing it to them consistently? And are they able to understand how to make it better because I know the team member is a little bit of a tangent but I think it is relevant. And then what is that, how are you determining what that actual metric is or what that accountability thing is so that everybody knows how they’re doing and how other people are doing. And when it comes to customers using a similar framework, your filter isn’t the same obviously as team members. You’re not going to be super transparent with a customer about these are the ten things we think we’re going to build, what do you think. That usually doesn’t work. What you’re trying to do though is, you’re trying to focus in on what is most important to your business right now. And how can you take that feedback and align it with it. How can you use filter. For example if a lot of the features that customers are asking for are not going to improve retention but retention is your biggest problem in the business today, guess what, don’t build any of those features that aren’t going to improve retention. Find the ones in the feedback, or find the feedback that aligns with the features that are actually going to help improve retention. So it just goes back to what’s the outcome you’re trying to get.
Steli Efti: I love that. Alright I think that that concludes the episode for today. This is an interesting topic if anybody that listened had some strong feelings or a story to share, a philosophy or something they’ve seen, a company do well or do really terribly bad, please let us know. We always love to hear from you. Send us an email at firstname.lastname@example.org or email@example.com and let’s keep this conversation going. I do think that more businesses have to learn how to not just react to whatever customers or employees or anybody else is throwing at them, and be in a super reactive mode. But really think about how to treat their customers, their employees, the team, in the best interest of the overall business and in a way that’s really fair and has longevity in mind. And that’s something that I think is missing and something hopefully we all can work on to improve long term.
Hiten Shah: Yep, couldn’t agree more.
Steli Efti: That’s it from us, bye-bye.