Some people don’t like to say no to a customer. This is especially true if you’re just starting out, or if you don’t have a lot of customers at the moment. It can be tempting to say yes, just to get some money in, any money. But there’s a downside to this.
Firstly, there’s what the economists call the opportunity cost. Opportunity cost is where there’s a hidden cost, not necessarily financial, to any particular action. If I watch the Great British Bake Off right now, rather than write this blog post, there’s a cost to watching the programme.
That’s cost might be that I have to write article another time, so the cost might be that I have to spend time at the weekend catching up. Or the cost might be that I lose the goodwill of the lovely Joanne Munro, who I promised I’d have this article ready for her last week, where it’s going to appear as a guest post on a new site she’s launching. Joanne might get annoyed with me, might decide that I’m flaky, and never recommend me to another person. I might lose thousands of pounds of income. No cake making and jolly jokes for me.
Sometimes you just have to say no to a customer
You don’t have to take on every single customer, and sometimes it’s a good idea to just say no, particularly when you just know that customer is going to be trouble.
Say no to a customer sometimes because your time is valuable
The opportunity cost of taking on a crappy, poor paying customer is usually your time. If you’re looking after that customer, you’re not spending your time on marketing, on networking, on putting your blog links on google +, or writing guest posts to enhance your expert status and make people want to buy from you. And there’s usually a double opportunity cost to taking on a customer who isn’t willing to pay your price, because those are the customers who are usually going to ask you for a lot of attention and expect extra work.
What is a Lidl customer?
I call these customers, Lidl customers. They want everything at a cheap price. They might not have much money to spend, or they might just like a bargain. For some people in business, squeezing a bargain out of suppliers is a badge of honour, important to their self esteem.
Lidl, the supermarket, specialises in these people, people without much money and people who like a bargain. They’re set up to sell to them and they’re mega successful at doing it. And they can do this and still turn a profit because they have big buying power, fantastic supply chains and have worked really hard to cut all unnecessary fluff and friction from their organisation. As a small business, you cannot compete with the big guys like this.
If you’re a designer, you can’t compete on price with freelancers around the world who have much lower cost of living in their area so can do a day’s work for $50. If you’re a bicycle repair shop, you can’t compete with someone who is repairing bikes as a hobby and charging beer money.
So no to a customer because there will always be someone cheaper than you
There will always be someone cheaper than you. If you have to compete just on price, you need to think about how you’re selling your services, put some time into repositioning and doing some extra marketing. And say no to a customer who is just looking for the cheapest deal. They can go to Lidl.
In many areas of work, the cheapest alternative for your customers is free. Someone could get a copy of the book I’m writing on pricing for small businesses for free from their library, someone can get a copy of “teach yourself French” from the library or download a dodgy copy of a Rosetta Stone course online and have a free alternative to your intensive learn French weekend course.
So I’d advise gently but assertively telling the customers the Lidl customers that this how much it costs. Remember that they wouldn’t try to bargain in the supermarket. And you’ll be surprised by how many of them then buy from you. Maybe they have to go away and find the money from somewhere and then come back 2 months later, or maybe they were just looking for a bargain and they’ll cough up anyway. They can get the cheap or free version if they want to. I bought tomatoes from Waitrose yesterday for £2.99 – I could have gone to Lidl and got some for 50p. But I didn’t.
Be Waitrose, be the best that you can, and charge the equivalent of £2.99 for tomatoes. Your customers will enjoy your services, and you’ll enjoy providing them, and feel valued. Plus you’ll be able to pay the rent.
If you’d like some help with attracting the right customers
I specialise in helping little businesses who want to grow into bigger businesses. I help people to get to grips with their marketing, finances, processes, and how to attract Waitrose, Marks & Spencer and maybe even some Harrods customers who are happy to spend good money. If you’d like some help to boost your business, maybe we should talk.