Bozo price discrimination

Discussions
#1

I have a productized service business that occasionally drives me bonkers. Most of our customers are pretty good - they show up, pay, and we do our work. They look it over, maybe ask for a few corrections or ask a few questions, and go happily on their way.

Occasionally, we get people who seem to be real “high maintenance”. Very rarely, they’re just plain toxic customers, as described by @robwalling here: http://www.softwarebyrob.com/2010/12/09/how-to-detect-a-toxic-customer/

Difficult though they may be, however, the majority of these difficult customers are not actually toxic, they’re just difficult. They have somewhat unrealistic expectations of timing, support (they all want to chat on the phone, it seems), or are frustrated by their own technological shortcomings - which we do our best to help them with, but… we can’t do things like fix their computers for them. Perhaps they’re more akin to @patio11 's blue Googles lady.

However, businesses wise, they are problematic, in that they take up an inordinate amount of time and energy to deal with. They are the 20% in the 80/20 rule. When dealt with properly, sometimes they do turn into big fans: “someone solved my problem!”, so they’re not people we don’t want to exclude completely, but it’d sure be nice to manage them a bit.

I’ve been trying to think of a clever way to have them consider their interactions with us a bit more. I don’t suppose it’d be easy, but I was thinking along the lines of “get a discount on your next job if you keep your support interactions under N”. Naturally, worded in a nicer way, but the idea is to offer an incentive for people to be a bit more careful in their use of our time, and make them see it as a gift to them, rather than paying extra.

I suppose it could irritate some people, so it’s not something I’m going to do soon or without talking to some of our customers.

Any ideas or opinions?

#2

If you eliminate the 20%, you’ll have more time to focus on the 80%, and turn them into big fans. Big fans who aren’t a time-suck and who don’t annoy the crap out of you.

Difficult people will almost always find a way to be difficult.

#3

I agree with @tnorthcutt - ideally, focus most of your energy on the best 80%.

If you give a discount to people under N support contacts, you’re discounting your best customers when you don’t need to, and leaving revenue on the table.

I think you’re right that financial incentives are the best way to address it. I’d figure out a way to charge a higher amount to the people who require the most support effort. They’ll always be a pain, but at least you’ll be getting paid for the effort. (“Introducing our new Bozo Discount! Save -20% Today!”)

#4

Are you in business to make money or help people? Personally, I’m trying to do both.

My heart sinks every time I see @aol.com on an order. But it is just a cost of doing business. I try to help them the best I can. I can’t remember the last time I ‘fired’ a customer. But I won’t teach them how to use a computer. That isn’t my job.

No matter how many customers you get rid of, 20% of them will always make up 80% of of the support burden. That’s how power laws work.

Be careful with incentives. Dan Ariely tells the story of a nursery that decided to fire people who picked their children late. It made the problem much worse. Turns out people felt a lot less bad about turning up late when they could pay (in the form of a fine).

More on support here:

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#5

Not trying to be a typo fiend, but just to avoid confusion for those who aren’t familiar with Ariely’s tale – the nursery decided to fine people who picked up their children late, not fire them!

#6

Thanks for picking up the typo. It might make sense now. ;0)

#7

I agree with @coreysnipes on this. If you’re going to move forward with this type of plan, better to adjust pricing up for “the bozos” than to discount your regular customers. Can you introduce a Premium Service Plan that includes a time-limited amount of phone support for some substantial cost?

On a separate note, do you see some of the same questions repeated by these problematic customers? Is it possible to automate some of the problem away through a FAQ or forum support? Even if it’s just an answer like “This type of problem usually relates to your particular computer set up and is not something we can fix. Consider reaching out to $name_of_vendor_who_can_help.”, that might reduce the requests? Just throwing ideas out there…

#8

This is frustrating, I did fire a potential customer because of this. They wanted me to come down to their salon and train them but I ended up on the phone with the telco for an hour trying to get their internet connect. Eventually couldn’t because they didn’t have any of their provider details available, the router wasn’t working and wasted half a day. I am happy to help them with the software but they also have to put in some effort themselves.

#9

The problem is that the bozos don’t announce themselves as such :smile:

And you really have no way of knowing until after you’ve concluded your business with them exactly how bad they are. Firing them midway through the process just for being a PITA is probably a good way to get a bad reputation in a hurry. We do get repeat business though, so that’s where we can utilize any incentives.

Offering premium phone support is not a bad idea. I hate the idea of picking up the phone on a regular basis, but I guess with enough money I could hire someone to answer it.

Incentives can certainly be tricky to get right. I’m familiar with the day care story, which IIRC actually centers around intrinsic vs extrensic motivation: the lateness ‘fines’ transformed lateness into a commercial transaction rather than some kind of moral obligation. Another good anecdote:

Western palaeontologists working in 19th century China ’ a time of famous dinosaur fossil discoveries ’ were confronted with a unique problem. To speed up the excavation work and the rate of discovery at some newly discovered fossil site, the scientists paid villagers for every piece of fossil bone they brought. The unsuspecting scientists were at first pleased at the large numbers of bone fragments being brought in by villagers. Their joy evaporated when they learned the nature of the game. The reward-seekers had begun to systematically break large, intact bones into small pieces ’ selling more pieces maximized their pay-offs. This led to huge damage to the evidence, as intact skeletons had been shattered into tiny fragments.

Thanks for the list, @Andy - it’s all good advice. One I sort of disagree with is about outsourcing support. I do have someone who handles some of that, and … often it’s the real bozos that make it very much worth the money. My support person is not really wrapped up in anything emotionally, so it’s really nice to sit back and watch her give people some nice, cheerful, helpful responses even when customers are bordering on rudeness. I don’t outsource it to someone cheap without a native grasp of English. It turns out there are quite a few people looking for some part time work who are ok with doing this kind of support.

#10

I also had a similar problem. I run a jobboard and some people need more, others need less assistance. And being a “good price” company, it kind of sucked every time someone asked me to do extra. I will start to think “crap, this is a non-profitable transaction because I had to invest more time into it”.

After a long time of reflection, I changed the marketing and “good price” isn’t part of the selling proposition anymore. Rather, I increased the prices in order to include possible service / assistance needs. So with the price increase, I’m more comfortable in helping out, because it’s already included in my calculations.

The people who are in need of assistance - I will help them and I will deliver the service “on par” and they will usually be content. And for the people who are hassle-free? Well, I put in the extra effort and try to overdeliver. I give them a reason to stick with me as a service provider.

Because competing on price is just sucky. Quality and service will suffer, because your main focus is the price. But competing on service + quality, that’s where you can really make customers happy.

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