Turning away business from a customer with a fist full of money and a desire to buy what you sell may seem like a bad business tactic. For many people, turning away a customer is viewed as a tragedy, but in some cases it can produce great benefit. In fact, there are many instances where this tactic can be extremely profitable. I know, it sounds crazy, but let me explain. First, I want to be clear that this is a tactic versus strategy, so don’t start trying to make a bunch of money turning people away just yet.
Examine, for a moment, a couple of reasons it can be important to turn away business, and how it may benefit your business to do so. Face it, not all customers are great customers. There are bad customers in every business … yes, I said every business. Even if you own a coin operated vending machine company and never have to face the customer, there is such a thing as a bad one. There are ways to turn away business that are tactful and useful, and sometimes we just have to learn when it is right to say “no” to the customer.
What brought me to write about this today was that I recently expressed selectiveness to a friend who is in need of marketing services. It is not a matter of arrogance at all, but in my line of work, there are very good reasons I absolutely must turn away business. I only have a limited amount of time to render my services, and if I am spending time working with people who do not pay well, have a bad product offering, or are difficult to work with, I may as well stay in bed. Working with a client for the money alone would be miserable to me, and likely to them as well. Mine is an extreme case, but in every service industry role where time, creativity, and knowledge are the product, it is very important to seek the right customers and stop wasting time with the ones who hold us back. Turning away business can be a painful transition for those unfamiliar with the concept, but it can save a lot of grief.
(economics) The cost of an opportunity forgone (and the loss of the benefits that could be received from that opportunity); the most valuable forgone alternative.
When you are striving to be profitable, you must consider opportunity cost. That is the cost of opportunities that you will miss by taking on each customer. Any time you take on a new customer, there is a loss of potential opportunities elsewhere that could slip by because you are too busy.
In good and proper business transactions we can see that the customer is just as fortunate to make a purchase as the seller is to sell their product or service. If you focus on a better value proposition, competition really does not affect you as much. I have created many instances where a client raises their prices because their offering is worth more than they realized, and they were able to qualify it in their marketing message and quantify it in their business volume. This is the way it is supposed to be, after all. If somebody is willing to trade their hard-earned dollars, the seller clearly has something they want or need. If it is something with a limited supply and a sufficient demand, turning away business is sometimes not just the best option, but rather the only option. That is basic supply and demand, but there are still other reasons to turn away business.
The Arrogance of Purchasers
As purchasers, we often do not see things clearly and we become arrogant with our spending. There is always somebody else out there willing to sell things as if they are a commodity even when they are not. These sellers will offer something that is inferior, and price it low enough to capture the business of those who cannot understand the value difference. What this seller often misses out on is longevity and sustainable profitability. They do not understand the notion of turning away business for any reason, and the value it represents. This sort of selling as a commodity affects most businesses at some point (either internally or externally), and it is important to address it in your marketplace. In service industries, especially, it is a tragic end for many companies to fall into the trap of selling as if they are a commodity just to keep doing business … profitable or not.
A commodity is a good for which there is demand, but which is supplied without qualitative differentiation across a market. It is fungible, i.e. the same no matter who produces it.
A valuable lesson for both buyers and sellers is to recognize when something is not a commodity. Seeking qualitative differences is important to good purchasing, and conveying these differences is an essential of good marketing.
Overcoming Commodity Selling
I write what I know, so I am using examples from experience in my own companies to illustrate my point. Perhaps if you see that I live by my own advice, you can at least view it as sincere. When I consider people selling something as a commodity that is indeed not a commodity, it is easy to find examples. Let’s take web hosting as an example (the service that keeps websites up and running). I have been in the web hosting business as a wholesale web host selling to hosting resellers for a decade. Is it the same thing anywhere you go? Well, without a long drawn out explanation, I can say that it clearly is not a commodity. My company’s web hosting prices reflect the millions of dollars invested in higher quality equipment and network architecture that sets us apart. We turn away a lot of business, and thank goodness, because it allows us to keep the quality standards extremely high for the customers who want something better.
Is SEO a Commodity?
Another absolute case of a non-commodity that is often sold as such is marketing and search engine optimization (SEO) services. I see people every day who sell dreadfully ineffective but cheap marketing and SEO services. Tragically, I find many people in the marketing and SEO field who will drop their prices to try and compete as if they offer a commodity. In my line of work as a marketing consultant and enterprise SEO, it is pretty clear to me that my clients receive more quantitative benefit from the transaction than I do. Maybe you have a similar case of providing great value as well, and if so, it is best to recognize it. Sure, I get to earn a good living, but the dollars the client gets in return far exceed what I am paid. It kind of makes me like a money duplicating machine to clients. Would it make sense for me to take on every project that comes my way? Of course not, and especially considering that much of my profit is derived from performance-based contingency SEO. So I refuse to sell it as a commodity, which is why I turn down the vast majority of potential clients who approach me. It is stupid? Some may say “yes”, but my clients are fortunate for it, and my reputation has become valuable because of this.
Do You Want Cake or Do You Want Cake?
I also see the benefit to turning away business very clearly in another of the companies my wife and I own and operate, in the cake and confectionery business. It is a very busy time of year for cakes. There are a lot of weddings, anniversaries, and graduations this time of year, in addition to the constant baby showers, birthdays, company parties, and etcetera. Designer wedding cakes and custom gourmet cupcakes require a lot of time, creativity, and skill. If we tried to take on every customer, it would degrade the product for all customers. So we turn away business to keep quality standards high. This makes it better for business on both sides, the customer and the company.
If you are not selling a commodity, it is unwise to try and compete as if you do. There will always be somebody willing to cut their own business throat to beat you out of a sale just to drive revenue. Discovering and conveying your value proposition is essential. Sometimes that means that you will need to start turning away business.
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