Mushy points and the Costs of a Bad Customer

Unless you’ve been living under a rock for the past century, you must have encountered the phrase “the customer is always right” at some point.

Popularized in the early 1900s by large retailers, the phrase was originally intended to attract customers to large department stores on the basis that they’d receive a high level of customer service.

While business has morphed dramatically over the past hundred years, fast forward to today and we’re still obsessed with customer satisfaction. Leaving an airport bathroom, you may encounter a screen with a bunch of happy faces asking you how satisfied you were with the cleanliness of your toilet seat. Leave a chat window after typing away with a support representative and you’ll likely prompt a pop-up window asking how good the service was.

Yet while customer feedback is important, not all customers are created equal. In fact, choosing to serve the wrong customers can translate into a number of high costs for your business which are often overlooked:

Capacity

If you offer your customers a support component for a fixed rate, choosing the wrong customer can be a time suck on your support team.

A customer who refuses to learn to work with your application or who has unrealistic expectations may end up calling insistently – taking time away from serving other customers, or forcing you to hire a larger support team.

Brand damage

While many business owners strive to appease their customers, there are some people out there that won’t be satisfied no matter what you do.

Take the customer that requests that your app add a billion features. You add feature after feature and your app still isn’t up to their expectations. The next thing you know you’ve got a bad review on an app store and a bunch of negative social media attention – costing you time and marketing dollars to dig yourself out of the mess and worse, detracting other customers who could be a good fit.

Emotional costs

You know those days when you don’t feel motivated to do anything? Unfortunately, as a business owner, you can’t feel like not paying your employees anything on those days.

Abusive customers, the ones that make you cringe before you pick up the phone, can have that demotivating effect on your team. Constant abuse from customers can lead to high turnover and a significant dive in productivity – not to mention a poor attitude when serving good customers.

So how do you reduce the costs of the wrong customers?

The answer lies in identifying the traits the make up your ideal customer.

Start by listing the features that make up your perfect customer. For example, if you’re a start-up with a new app, your best customer may be someone with a strong willingness to learn new things. If you’re a fancy retail store, it may be someone who places a high value on appearance.

Once you narrow down your ideal customer, you can begin to track the ones in your current customer base who are closest to the ideal.

Enter mushy points – a ranking system that measures all that mushy stuff that make up the intangible costs of a customer base.

Let’s assume you’ve listed 5 characteristics of your perfect customer. A mushy point of 5 may be someone that meets all those characteristics. A mushy point of 4, could be someone who lacks at least one characteristic, while a mushy point of 1 may be someone that lacks all of them.

If you have recurring customers, you can assign a mushy point to each one. When you’re done, take the average of all the mushy points. The higher your average, the better suited your customer base is to your business.

With a really high mushy point average, you’re obviously doing something right! Your customers likely highly value your service and you’re serving them well. On the other hand, if you’re stuck with a really low mushy point average, you may want to ask yourself if you’re working with the right customers.

Of course, the mushy point scale is completely subjective – it’s a judgment call.

Why not stick with hard metrics like a fancy ratio or anything you can pull from an income statement? Subjective times call for subjective measures – if you’re going to measure how motivated your team is, how much work they can handle or how people view your brand, you’re asking for a judgment call.

It’s this judgment call that can make the difference between a profitable business and one that’s constantly in the red.

By constantly striving to attract the right customers to your business, you’ll not only be left with a motivated team, you’ll also have customers that really value what you do – the ones that give you the passion to get up every morning and serve them.

This blog post is brought to you by Josh Zweig, C0-Founder of Live CA LLP, Canada’s first online accounting firm that focuses on transitioning businesses to cloud-based solutions.

 Josh Zweig teams up with Ryan Lazanis, Founder of Xen Accounting to share insights on what it takes to attract the right kind of customers for your business. Get the entire story in our #smallbiz_expert Twitter interview!

Written by Josh Zweig

A graduate of the Richard Ivey School of Business in Canada, Josh has a passion for entrepreneurship. His experience with a “Big 4” accounting firm and several years in public practice as a CPA have allowed him to work closely with many business owners across a wide variety of industries. Josh went on to co-found LiveCA LLP, Canada's first online accounting firm that focuses on transitioning businesses to cloud based solutions.

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