As you begin to scale and add a sales team, you’ll encounter more and more drama with “bad” customers. These so called “bad” customers from a sales team perspective will include:
- Folks that share licenses that shouldn’t be. Sales will get mad they aren’t buying more seats.
- Folks that use SMB or other editions that should be on your more expensive enterprise plans. Sales will feel they are getting ripped off; and perhaps the worst
- Folks that sign contracts and don’t pay!! They signed a contract after all!
The bottom line is all these scenarios will consume a huge amount of internal energy, create tons of drama … and have no positive ROI.
Let’s talk here about the seemingly most frustrating one — the customer that signs a contract that doesn’t pay.
First, let’s assume the customer is in the wrong (somehow) and the contract is worth say $30k. First, of course, you can just turn off the service. If the customer has deployed the product and is using it but has not paid, that will certainly get their attention. But … if you shut off a mission critical service and disrupt their business, watch your NPS plummet below zero. You have to give them notice and a grace period before doing this. Assume you have done that properly though, shutting off the service generally gets folks to pay. It certainly did for us at EchoSign / Adobe Sign. A big red banner at the top of every page, with a 14 day countdown to service shutdown, got 99% of the deadbeats to pay.
But what if they aren’t using your product, and never have?
Here’s where you know you have a churn-and-burn deal. Even if the customer signed a 3 year contact, if they never even used the product, one way or another, the deal wasn’t real. The sales rep might have sold them on functionality that doesn’t exist, or is too complicated to deploy. Or the product may be too much business process change for the customer.
Whatever it is, if a customer spent weeks or months looking for a vendor, evaluating a vendor, and signing a contract … and then never users you product … they certainly weren’t playing games. They wanted to solve their problem. It is just, in the end, you couldn’t provide the right solution.
It’s time to move on. You can threaten them. You can attempt to send them to legal (but your legal fees will quickly grow larger than the deal value). You can send them to collections (and most collections agencies won’t do all that much).
But if you do, whatever goodwill you had during the vendor selection process will be gone.
It’s better to move on. Perhaps you will get them next year, if the project just stalled. Or perhaps you lost them to a competitor. But those deals don’t always work out either. If you lose a deal to a competitor, assume in 2-3 years you’ll have another shot at the deal.
So when a customer wants to leave, let them go. Thank them. Smile (even if it’s frustrating). Don’t try to enforce a contract for a service they aren’t even using.
And then your chance of getting them back again later has just gone way up.
Think of the old days. When folks gave Money Back Guarantees. Think if you did that. Think of how much friction that would take out of a risky buying process. And think of how much goodwill it would earn. At least some.
The post What To Do When a Customer Doesn’t Pay? Let it Go and Move On. appeared first on SaaStr.
Small Business
via https://www.aiupnow.com
Jason Lemkin, Khareem Sudlow
