Is This Loyal but Low-Margin Client Still Worth It?
The shop owner is thankful for her repeat business through the years, but now he wonders – should he cut her loose? We ask for your thoughts in “The Case of the Loyalty Test.”
EVEN WITH HIS office door closed, Javier Alvarez heard raised voices — or at least one raised voice coming from the front of the store. As he opened the door, he heard his name invoked mid-sentence.
“… is Javier here?!” a familiar voice called out loudly. “I want to speak with Javi!” Before he turned the corner to enter the lobby, Javier steeled himself to prepare to speak with Mrs. Yarrow, a nearby craft store owner and his longest-standing customer.
ABOUT REAL DEAL
Real Deal scenarios are inspired by true stories, but are changed to sharpen the dilemmas involved and should not be confused with real people or places. Responses are peer-sourced opinions and are NOT a substitute for professional legal advice. Please contact your attorney if you any questions about an employee or customer situation in your own business.
ABOUT THE AUTHOR
Created by ROLF L’MAO, Signs of the Times’ mascot. Email him at firstname.lastname@example.org.
Illustrations by Karina Marga Cuizon
“Mrs. Yarrow!” he said, emerging cheerfully. “How are you? How can I help you?” he asked, though he already knew what she was here for. The same thing she’d been returning to Cielo Graphics in suburban St. Petersburg, FL, for — every other month for 14 years: business cards, which she gave away as “tip cards” at her store.
“You know me, Javier,” Mrs. Yarrow said. “I’m here for the usual, but I guess your new person here —” pausing and nodding her head disdainfully at Emily, who was, in fact, new — “was telling me you aren’t offering business cards anymore. Is that right?” she asked.
Javier smiled again before he replied. “Well, Mrs. Yarrow, the short answer is yes and no. I have instructed Emily…” he said, now turning to his new employee, “Emily, this is Mrs. Yarrow, our longest-standing customer. Mrs. Yarrow, this is Emily, the latest addition to our growing team.” He turned back to Mrs. Yarrow, who was nonplussed. “Um, anyway, business cards are no longer something we are offering to new customers, but of course, we are … happy to continue to provide them to existing, loyal customers.”
“Well alright then,” Mrs. Yarrow replied, happy again. Then directed at Emily, she said, “Your boss has always been so kind and polite, back to when he wasn’t much older than you and he started his shop just three doors down from us at Forestcrest IV,” referring to a dated strip mall half a mile away. Javier had moved Cielo Graphics to its present location five years before, having outgrown the mall space.
In truth, Javier felt Cielo Graphics had outgrown minimally priced products like business cards and name tags, as well. He had instructed Emily and the rest of the staff a month before that the company would no longer be offering products or services under $200, but had forgotten to tip her off about Mrs. Yarrow. He stole a chance to look over to Emily and mouth “Sorry…”
“So,” Mrs. Yarrow said, breaking Javier’s reverie. “I’ve got the next tip ready,” she said, waving her flash drive. Every other month for 14 years, Mrs. Yarrow had hand-delivered her artwork, all the way back to floppy disks. She could easily upload or even email the new file and order request, but she insisted on dropping by to say hello to Javier and to bask in the inevitable mention of her being his original client. “I’m your OC,” she liked to joke, though happily not today.
“You know, you can get these a little cheaper online from VistaPrint,” Javier had told Mrs. Yarrow a couple of years before. “I don’t want to order from a faceless website,” Mrs. Yarrow had replied. “I want to give my business — even if it costs a couple dollars more — to you!”
“How do I put this into the system, Javier?” Emily asked, to which he replied, “I’ll take care of this one, Em. Why don’t you see if Boris needs any help with his project?”
“OK,” Emily smiled, and turning back, said, “Very nice to meet you, Mrs. Yarrow,” before disappearing through the door and into the back of the shop.
“Let’s get your order entered,” Javier said to Mrs. Yarrow. “The usual, you said, so … $49 plus tax, as always…” but his voice trailed off. As he keyed the order into the system under “Miscellaneous,” he thought to himself, “I’ve got to get out from under doing these… They’re a total loser!”Advertisement
The Big Questions
- Should Javier find a way to ask Mrs. Yarrow to take her orders elsewhere? If not, what can he do, if anything, to improve the situation? And if so, how do you tell your most loyal customers you have outgrown them?
Order the cards from VistaPrint, [charge] a small markup and cover the administrative cost for your time to keep an existing customer happy while covering your time. These building-block relationships will never go away and are part of your culture. The alternative is turning a long-standing client away.
It is certainly a challenge to deal with loyal customers as your business changes. Javier is prolonging the inevitable. The situation is already getting heated and will continue to do so. We want to treat our customers with respect, but it is very important as a business owner to focus to remain profitable. These small orders are a distraction.
I can relate to Javi. We have been in business since 1982 in the small town of Ashland, OH, and we have several Mrs. Yarrows as long-term customers, but I revert to my father’s sage advice, “Son, I know we just cover the cost of Mrs. Yarrow’s order, but you have to realize that over the years she has been one of the best advertising mediums we could ever ask for. Mrs. Yarrow’s word-of-mouth advertising has been constant and never-erring. She has steered many new customers into our shop. It is hard to put a price on the service Mrs. Yarrow has done for us since she started coming to us 30-plus years ago.” I instantly saw my father’s point of view, remembering all of the people over the years who called or stopped in saying, “Mrs. Yarrow sent us. She said you are the only place she would buy a sign from.” She has been a living breathing, walking, talking ambassador for our shop!
My business would continue to take care of such a customer, even though it’s no longer a high-profit center. In over 30 years in this industry, I am thrilled to see customers that have been with me for 15, 20 and 25 years or more. They have fed my (and my employees’) family for years and they have “bought the right” to keep doing business with us. Every customer, no matter how small, old, etc., has friends and family who may need services that you can provide. I’ve seen it happen innumerable times over the years that someone who can become a “great” customer comes in after being referred by their mother, daughter, neighbor, etc., based on the service that you provided. Raise prices and/or find a place to outsource such work so that it’s profitable again. If you aren’t going to offer certain services or items anymore, then kindly explain that to your customer base in advance so they can make other arrangements. Planning ahead for such changes is crucial to great client relationships.
A loyal and long-time customer is priceless. The little bit that it will cost will not outweigh what a loyal customer provides to the business. Orders may not be much, but referrals (word-of-mouth advertising), repetitive orders, consistency pays more than your time and expense on this. Retention is more cost effective than onboarding new clients. I actually have one of these clients that I … do projects [for] outside of my main business and she has followed me through other companies to my own company for 20 years. She’s too valuable to turn away from because of a small project that I really just break even on.
Here is where you have a chance to shine as a “human being” and not a “bottom line first” business person. Frankly, Mrs. Yarrow won’t be around forever, but she stuck with you for many years. And this one order every [other month] certainly won’t damage your bottom line that much, as long as you just reserve exceptions for customers who have been with you a long time, or who frequently give you large and lucrative orders. You may find that, even with a price that leaves you virtually no profit, your best bet is to take her order, send it off to VistaPrint, and thank her for being so loyal. Or, just grit your teeth a bit and print up the order. Don’t forget to remind Mrs. Yarrow that new customers would need to meet the minimum, but you would appreciate it very much if she would remember to tell other business people she knows about you.
Honor the loyalty.
Nevada City, CA
I’d give Mrs. Yarrow this order for free and inform her that we stopped selling business cards because we actually lose money on this product. Apologize and let her know she would have to find another resource.
Like most shops, we also have an order minimum and, although it doesn’t happen very often really, I will bend the rule for a long-time customer like Mrs. Yarrow. I can tell you that my Mrs. Yarrows tell everyone who will listen how much they love our products and service — and that’s priceless.Advertisement
Gympie, QLD, Australia
You continue doing the job, as the customer is very loyal, even if she doesn’t realize that the job is a time waster. You got to where you are today due to these humble origins. You could also print out the VistaPrint quote and attach it to your invoice, as an enduring nudge maybe.
Farmington Hills, MI
It sounds like he can still produce the business cards, though the margin is not there for the small, low-quantity orders. One possible solution: Try talking the client into ordering, in this case four tip card orders at one time. This would hit the minimum of $200 at $50 per order, while allowing the business to continue making an agreeable margin and providing the same service the client has enjoyed.
Rice Lake, WI
You continue to make your “OC” customers cards. Even if you are losing money on it. You do this because she is an OC. She has stuck by your side and used your business year after year. She had your back and you will continue to have hers. Imagine over the years, how many people she has promoted your business to. You aren’t making money on her jobs per say, but if she is this loyal, she is only spreading good words about your company and I’m sure she has brought in other customers that make up for her small jobs. I have a few customers like this. I do get frustrated with their jobs at times, but I do not let that show to them. It may be an “arts and crafts” project to me, but it means something to them. And those are the people that are out there promoting our company, giving us better advertising than you could ever buy.
First of all, try to make a bit more on these. Increase the price by $10 to cover inflation, [or] farm them to Vistaprint. If you have become so huge that you can’t take small orders, you are big enough to absorb a break even, or even a small loss on an order or two. Gradually increase the price to a profitable one on future orders. After all, your customer has already expressed a willingness to pay a bit more for your service. Take advantage of this, keep her happy, her word of mouth may get you newer, better customers.
Osage Beach, MO
If it’s a “real loser” product that just means you aren’t charging enough for it. The fact is, if you have a product for which all you have to do is upload the client-supplied artwork to a print provider and write an invoice to the client, then as long as you are charging the client at least twice or three times what it costs you in money and time, the item is making a profit. And profit is profit, no matter where it comes from.
The big undercurrent to this hypothetical is: What do you do as a leader, when you discover that the rules that you’ve implemented for others in the organization are difficult for you to abide by? All eyes are on the owner in this story. Will he be even-handed with a business rule that makes economic sense, even if it causes him personal discomfort? Or will he make exceptions for himself, and let his staff just chalk it up to “owner’s prerogative?” Continuing to spend time on a customer, losing money, because they are guilting you — makes zero sense. Furthermore, it does not display good stewardship of the company resources. Better to stick to his guns. If he lacks the will, he must change the rule he set with his staff — so that people understand what to do without constantly running back to him.
You don’t tell your loyal customers you have outgrown them. You tell them you need to raise the price every so often, so they finally get that they are paying a lot and perhaps figure something else to do or somewhere else to go. Or you suck it up and just do their job because you’re a good business and they are a good customer. AND, you never know if they refer you to anyone else. It feels like the right thing to do.Advertisement
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