The Cost of Bad-Fit Customers and How to Avoid Them - SmartKarrot Blog

The Cost of Bad-Fit Customers and How to Avoid Them

A bad-fit customer is one who does not get value from your offering. There are costs of working with them including churn.

The Cost of Bad-Fit Customers
The Cost of Bad-Fit Customers

The relationship between customers and companies is difficult to handle. Customers who are not the right fit will churn eventually. Earlier salespeople aggressively tackled and made buyers part of the business. These days, the right thing to do is ensure a high-quality customer relationship is created to reduce churn. The first step in this begins with choosing the right customers. There is a huge cost involved with bad-fit customers. There is an investment in resources, people, and negative sentiment.

One thing that should be clear is how bad-fit customers will never be happy with the company at all. Regardless of how much effort is put into it, the chances of success are low. According to Lincoln Murphy, bad-fit customers becoming clients is a leadership issue.

Bad-Fit Customers

A customer is deemed bad-fit when companies cannot deliver value based on the available resources, products, or offerings. That means the chance of delivering value for these customers is much lesser. In these customers, the success potential is zero. The chances of them burning are higher than ever. The cycle of sign, use, become unhappy, churn, and burn becomes faster.

Why is it Necessary to Identify Bad-Fit Customers

Bad-fit customers are those who do not fit in with the company. These are customers whose needs will not be met by company offerings. There is no alignment between what the customer wants and gets.

Increased Costs

By focusing on bad fit customers, there is loss of time and human capital. If this time and resources were spent on other customers, there might have been an increased lifetime value. If your product is being displayed to people, it is not built essentially for. There are increased costs and this makes the whole process cumbersome for both buyer and seller.

Loss of Trust

If customers do not achieve what they want from the product or service, their trust will reduce. When customers come onboard and do not get what they expect, they will feel duped. This makes churn easy for them. Misaligned sales can be an issue of trust to begin with.

Reputation is Harmed

Don’t we all look at online reviews, social media, and testimonials before making a purchase? Prospective customers now research on sites online, ask friends, colleagues, and word of mouth. So if a bad-fit customer tells another prospect that the product is bad, this results in lesser interest and goodwill.

Reduced Team Morale

There is bad business karma when your team members do not like the work. It demotivates teams as they work on making customers see a certain value. No one likes to find that their work in a certain direction is wrong after hard work.

High Churn Rates

Wrong users churn. Customers who are a bad fit will get tired of trying the product. They will stop trying to understand and find value eventually. They will cancel their subscription. These are customers who will always look to churn since they do not get the right value from the product.

How to Avoid Bad-Fit Customers?

You cannot check every customer. But it would be prudent to have a customer profile. An avatar of what your customers deal with, niche, size, preferences, etc.

Create an Ideal Customer Profile

Think of this as a wish list. This has everything you want to tick off with your customer. Their likes, dislikes, what value they get, and more. You will get some valuable data when you create a customer profile. This makes it clear as to whether a person or prospect will be a good fit or not.

Decide for the Larger Good

This is the hard way- you have to sense the right customers and choose to work with them. This may not be the easiest path but it is important to refine the customer pool. To refine, there are some boxes you can attempt to answer.

  • What stage of the business is going on?
  • What beliefs are not matching with them?
  • Will they get the desired value to meet their needs?

Do the Right Marketing

Share your value openly so that people will join only if they see a fit. When people know this information through emails, blogs, social media and more, they will know if they would fit in well. When marketing is aligned with what the company wants, it is much easier to refine bad fit customers. This is because customers become aware of the type of products and how it will work. This will help understand customers better.

The Solution: Customer Success-driven Sales

 Sales needs to be driven by customers. Success is truly when customers achieve value through the offering. The goal of every company is to make sure customers who are acquired achieve success. Customer success operations need to be based on acquiring the right customers. To get that, creating a customer prototype for customers will help.

  • What is their industry?
  • Who are their primary users?
  • What is the budget of the company?
  • Are they churning from other company or first-time buyers?

CS leaders need to ascertain customers who are a good fit and plan operations on those lines. With this framework in mind, guidelines can be created to curate a better strategy for sales and success. With coordination and communication, it is possible to enhance the symbiosis between sales and success. Once the ideal framework is determined, everyone working on the sales funnel can be informed. This will reduce and avoid bad fit customers. This is also another part of the sales process: qualifying your lead.19

Bottom Line: Don’t Churn to Learn; Simply Avoid

Quantifying bad fit customers is important to understand revenue aspects. In some cases, bad fit customers may fit for upsells. They may like allied products that are sold. Avoiding customers who were a wrong fit to begin with is necessary to get the right success. As every SaaS company becomes customer-centric, it is imperative to choose the right ‘customer fit’ profile. The concept is simple- you need to nip the bud in the beginning. Don’t churn so that you can learn.

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