How to deal with irrational customers?

[Rick Lee]

I've never had anyone get irate at me before because I offered them too large a discount. But that's what this is boiling down to.

In June my boss and I met with a client, a major city's tourism bureau. They had been paying full rate sheet pricing and sending us occasional work. My boss offered them a package of 30 (let's say widgets) for $8k paid upfront, which was a good 70% off the rate sheet (we discount a lot for prepaid volume commitments). And we'd first give them a freebie so we could demonstrate value. They sent the freebie job in right away and then dodged all my calls and emails, attempting to go over the results to prove value. Big surprise. But then they sent in a few more jobs that they knew would be billed at rate sheet because they hadn't signed onto that package we'd offered them.

Late November comes and they decide to go with this contract, which we put no expiration date on. So they signed and are loving it. But they haven't paid their old bills, two of which total $6k.

This is the kicker. They're not asking to have them retroactively covered by the contract and wouldn't even bite when I offered to knock off 20% just to placate them. No, the boss there says he can't explain to his board why two jobs cost $6k when they also got a 30 pack for $8k. Well, those two jobs were pretty large, they had no discounts or contract in place, ignored my repeated attempts to get them into such and, well, that's how we bill. Add to that the fact that they had previously paid some invoices for similar sized jobs in the last year and I have a hard time feeling like we were surprising them with anything.

The boss there says our rate sheet prices are outrageous and exorbitant because we discount so much for prepaid packages. WTF? This is like complaining about int'l. roaming charges after you turn down an offer to roll them into your plan for an add'l. $10 per month. I don't know what to do with this guy.

[cashflyer]

I've seen this before... that if you are able to discount 70% on a job, that means you were already 70% overpriced. It's not that they are mad about getting a discount now; it's that your discount has allowed them to discover that you have been gouging them by a huge margin. You're a bad person, and not to be trusted.

[Rick Lee]

Ha! I think the issue is more a matter of this guy will need to explain to his board why he sat on my offer for so long and continued to send in work at full rate sheet price when he could have taken the discount long ago. Hey, I want to help him out, keep him happy and the check writers there happy. But sometimes you just can't make someone happy. He knows my boss and I are not the guys who sets the rates.

[wdfifteen]

Originally Posted by Rick Lee

The boss there says our rate sheet prices are outrageous and exorbitant because we discount so much for prepaid packages. WTF? This is like complaining about int'l. roaming charges after you turn down an offer to roll them into your plan for an add'l. $10 per month. I don't know what to do with this guy.

I've encountered the same thing. I told one guy my business is like a train. It can travel from LA to New York by acceleration to 100 mph, screeching to a halt, accelerating again, stopping again, over and over and achieve a 30 mph average speed, or it can stay at 30 mph the whole way and get there in the same time with a whole lot less fuel, less wear and tear, and less cost to the operator. My business in the train, and my billing pays for the fuel and wear and tear. If I can keep my business running nice and smooth instead of big jobs coming unexpectedly and then nothing for months, I can charge a lot less. He seemed to get it.

[stomachmonkey]

Originally Posted by Rick Lee

Ha! I think the issue is more a matter of this guy will need to explain to his board why he sat on my offer for so long and continued to send in work at full rate sheet price when he could have taken the discount long ago.

70% is a huge discount.

And he thinks there is still profit in it for you.

He thinks he's been taking it the ... till now.

[Icemaster]

"If you're concerned about the boards reaction, I'll be happy to explain it to them for you...would you like me to do so in person or in writing?"

But then you also need to evaluate the worth of the relationship as it comes to future business. Do you want to set a precedent and let them treat you like a side of beef or would you like to build a relationship? And is this someone worth building a relationship with?

Many different angles on this one...

[drcoastline]

I think the problem is two parted and has pretty much been answered in post 2 & 3. I think cashflyer is right in his comment. I also think You already answered a large part of the question Rick. Maybe he did sit on his ass for some reason and now has himself in a pickle with his boss.

In my opinion it's time to take this guy to lunch. One on one where he can speak freely and you can get to the bottom of the problem (but we already know the answer) and get the answer you need to fix this for him and make him look like a hero to his boss.

The other problem I see is your boss diminished your products value and that is leaving a bad taste in this guys mouth as cashflyer stated. This guy ( I would feel the same way) is feeling ripped off by you. It may not be your fault but you are on the front line so to him it is your fault and you are going to get the reputation not whomever set policy for your company sitting in the back ground.

You gave him 2 of something for $6K and after the fact offered him a 20% discount.
Your boss gave him 30 of the same product for $8K @ a 70% discount up front.

This guy didn't bite on your offer of 20% of $6K for 2 widgets because he wants a higher percentage. Can you get him 40-50-60% tell him it is carrying costs?

I gotta tell you if I paid $6K for 2 of something from you and then went to the same company and bought 30 of the identical product for $8K from somebody else. I wouldnt pay your bill either. Let me yalk to the other guy. I would take my chances in court and then never use that company again and tell all my colligues how I was ripped off by this guy Rick.

Now before you shoot me. I know this isnt your fault. The guy drug his feet. But your boss under cut you before your bill was paid. So this guy can deal with you at one price or your boss at a lower price. You are going to get labeled the guy who over charged. You need to talk to your boss to get high a higher discount. On another point why is your boss in on your account and under cutting your price to boot? He should have told you to give the guy the 70% discount. Wrap the two purchases together and average the discount.

Hey but that's why I work for myself I had a boss do the same to me. Now he doesnt have a job.

[drcoastline]

I also wonder? I bet your contatc is also thinking why not just throw my two widgets on the 30 deal package and sicount them at 70%. Now give me 28 widgets.

[Rick Lee]

Originally Posted by drcoastline

You gave him 2 of something for $6K and after the fact offered him a 20% discount.
Your boss gave him 30 of the same product for $8K @ a 70% discount up front.

Yes, but in months and years past, he had also sent in large jobs that billed similar amounts and he paid the bills without complaint. To be a little more specific, we charge by word count because of the man hours involved in proofing and editing the work. 400 words is standard. Beyond that we bill in increments of 100 words. Send in a 2000 word job and that's a 400 word base charge plus 16 length charges. He's done this in the past and never complained about the bills. Now that he's been offered and agreed to a prepaid deal at a huge discount, he's complaining about the old pricing and our profit margin. Like I have anything to do with that.

Honestly, if you only send in one or two jobs a year, it's not that valuable to us because we never know if we're getting more work in the future and you're not bound by any kind of contract, so you can always go to a competitor (all of whom have very similar rate sheet pricing). Do any of you feel gouged when Verizon wants $600 for a new phone if you're a current customer, but will give it away for new customers signing up for two years? So that's why we discount so generously for those who prepay and commit. Not my decision, but I can't say I disagree with it. At least in this job the discounts don't come out of my pocket like they did in the mortgage biz.

Had my boss not made that offer, this client would have maybe sent in one or two more jobs this year and said that was all we're getting because of cost. I'd much rather someone spend $8k on 30 jobs than $8k on three. Over 30 jobs we will have ongoing communication, build a relationship and they're not going to leave us if one or two or even nine of them don't generate great results. Send us one or two jobs that don't do well and they'll likely be done with us.

[Rick Lee]

Can't roll them into the contract. They were mos. ago, the billing on them is closed and it'd come straight out of my pocket. On this I'd rather lose the customer. This would be buying an insurance policy after the fire.

[KFC911]

Originally Posted by Rick Lee

... I don't know what to do with this guy.

Tell him to search "Pelican Spoons Rick Lee" and he'll come around. You're between a rock and a hard place...once that carrot was dangled imo.

[drcoastline]

Once again, you are the guy out front. Your guy doesn't care who makes the decision on discounting. If your the representative it's you and you are going to hear the crap. That's just the way it is. He is going to complain to someone else in your company when he is getting s**t from his boss (which may be happening already). Then he is going to go to your boss and give him s**t. Then your boss is going to give you s**t so you will be getting it from both sides.

You just stated what the problem is. " Hes complaining about the old pricing". The idea of higher pricing is understandable for a one or two time job. This guy has now made a commitment. This is an oportunity for you o be a hero to this guy

In my opinion you need to go "SELL" whomever in your company can authorize one of the following.

1. Discount outstanding bill to current pricing.
2. Roll in outstanding order into the new order leaving 28 jobs to complete.

That will make the client happy, and tell your boss to stay out of your accounts unless you ask them for help. The only time I have ever thought it necessary to have a second person in on an account is if it is technical or specialized. Other wise stay away I don't want someone else screwing up my income.

[Rick Lee]

Actually, my boss told me I can discount the old invoices up to 50%, but he trusts I "won't cave easily." That would mean I give up $3k in revenue I've already been paid on. But I dangled the 20% discount out there and the customer ignored it. He's not asking for it to be comp'ed or credited! He just wants to bend my ear about how outrageous our rate sheet pricing is. That's something I cannot do anything about. I understand sometimes my job is to let customers bend my ear, even if they're not asking for anything and I just have to sit there and take it. Well, he did ask for me to write up a detailed explanation of the old invoices and how the word counts are done and I did that. Haven't heard back yet.

I don't mind my boss offering these deals at all. They're better than I'm allowed to offer and they get results. The problem is when a customer dithers for months while still sending in work and then complains about the bills vs. what he would have paid, had he taken the great offer we made mos. ago. Again, this guy isn't asking for anything other than to bend my ear, which makes less sense to me than demanding to make the discounts retroactive.

Nowadays, we put expiration dates on written offers when we send them to clients. I think it's sort of cheap salesman talk, since we're not gonna retract it if the customer misses the deadline. But the purpose is to get them to sign and return ASAP before they send in more work and ask it to be retroactively added to the contract, which creates a billing nightmare.

[Rick Lee]

I should add that I have plenty of customers who think nothing of spending $10-$20k per job and do so regularly. Every customer has different pain points. And when my boss and I met with this current one, his pain point was ease of use vs. price. We offered him the best of both worlds by making it all into one invoice for $8k and giving him 30 jobs with no length charges. That not only is a huge discount, it makes the billing a once-a-year total cinch. And when I was there a few weeks ago, I demo'ed for them how to do everything online and quickly. They loved it. He told me to be sure to come by and visit every time I'm in town because "he always learns something new when I visit." I think I've proven value here several times over. I just don't know what else to do.

[stomachmonkey]

Originally Posted by Rick Lee

....Honestly, if you only send in one or two jobs a year, it's not that valuable to us because we never know if we're getting more work......so you can always go to a competitor.....

So he is thinking, "These guys are trying to squeeze me for every penny that they can every time they can."

Do any of you feel gouged when Verizon wants $600 for a new phone if you're a current customer, but will give it away for new customers signing up for two years?

No, I understand the "discount" is amortized over the contract term. That's why when my contract expires I get a new device at the renew discount rate.

Don't get me wrong. I have this discussion with my CEO and Chairman all the time. They have this bad habit of shopping everything around. Translation, our vendors don't feel they have our business regardless of how well they perform and it is reflected in price and more importantly in service, they are not willing to do anything extra, special, go the extra mile when we need their help to get us out of a jam.

I'm of the opinion that you identify 2-3 primary vendors for a particular service. Make it clear to them that we consider them a partner. That doing their part to help our business is good for their business.

In all honesty the problem here is the amount of the discount. It's so far out of line with what he is accustomed to paying that it's really difficult if not impossible for him to rationalize.

If I were your client about the only thing that I could swallow is set up charges. Every job requires some amount of work before the real work can begin. Printing is a prime example. It costs X $'s to set up a printing press. Does not matter if you are printing 100 sheets or 100,000. It's a fixed cost which is spread out across the quantity so your price per unit drops drastically in some cases.

[drcoastline]

OK, so it sounds like you may be on your way to settling this problem. One thing I have learned is people like to beat up the lowly salesman. You can't take it personally unless they make it personal. Again, it sounds like he is getting s**t from his boss so he has to pass the crap on to you. he probably failed to secure a future discount while they make the decision to go long term. My thinking is his boss is saying "you mean you didn't say we will do to jobs at $$ but if we commit to long term we get those at $$$?) It makes plenty of sense since he asked for a write up. He needs to take it somebody get approval. he's not making the decision. So wait a week or so. If no answer go see the guy and ask if you can speak to accounting or whomever pays the bill or who he answers to. Explain it wasn't so and so's fault this is how the company works and why. Now what can I do to correct this? It takes the pressure off your client and makes him your ally.


Fine if you don't mind your boss offering discounts but it sounds like he may just have cost you $3K. Personally I don't want anybody taking money out of my pocket like that. If your boss wants to give up the $3K so be it. Make all the deals you want. I just don't agree the company will make it's profit and you get to take the loss. That doesn't work for me. You need to be in control of your accounts.

If you are forced to pay the $3K have it prorated over a year or so to ease the pain.

[Eric Coffey]

Originally Posted by Rick Lee

On this I'd rather lose the customer.

Yep. The customer is always right....... until he is wrong. Time to shift the balance of power to your corner, hold firm, and let the chips fall where they may. If you lose him, send a very professional letter of thanks, and appology for the confusion (outlining what happened/reasons why) to this guys boss and/or the board. YMMV.

[1990C4S]

a) your boss missed the boat by not insisting on payment for the old invoices as a condition of the new offer.

b) he missed it again when delivered the prepaid work with the old invoices unpaid.

c) the only power you have now is to threaten to cut the customer off, and that is your call (assuming you don't want to hold his future work hostage).

d) some 'selling' is required to get the customer to understand that there is a huge benefit to prepaid work.

e) that's sort of how gym memberships work. Some people pay one price, others get a sale price. Same as airline tickets. Until YOU learn the system YOU pay more. That's a lesson for the customer. Although it appears he doesn't want the board to know he's a slow learner. An education is expensive. So is ignorance.

[Rick Lee]

Originally Posted by 1990C4S

a) your boss missed the boat by not insisting on payment for the old invoices as a condition of the new offer.

b) he missed it again when delivered the prepaid work with the old invoices unpaid.

c) the only power you have now is to threaten to cut the customer off, and that is your call (assuming you don't want to hold his future work hostage).

d) some 'selling' is required to get the customer to understand that there is a huge benefit to prepaid work.

e) that's sort of how gym memberships work. Some people pay one price, others get a sale price. Same as airline tickets. Until YOU learn the system YOU pay more. That's a lesson for the customer. Although it appears he doesn't want the board to know he's a slow learner. An education is expensive. So is ignorance.

Just saw this response. In fact, I paid $50 for a 10 day gym membership while visiting my folks in NJ, when it was only $20 a month if you prepaid for a year. $5 per day vs. $.65. Hmmm. I didn't complain. It was a lot better than paying $10 for daily visits.

We made the offer to this customer months before they racked up the outstanding invoices. I think we will start putting a rider on these contracts that outstanding invoices get paid before contract pricing takes effect. But that wasn't my boss's oversight. It was the customer's because they kept sending in work they knew they'd be paying rate sheet for, all while I was calling and emailing, telling them they'd save a ton of money by signing that deal. I know people don't sit by their desks, waiting for vendors to call, but I like to think we have the kind of relationship Stomachmonkey advocates in his job. These guys view me as a consultant and have told me to come visit every time I'm in town because they learn something from me each time. I would think that might make my phone calls a little more urgent than just a nagging vendor/sales call. I don't call customers for no good reason and never do so without first having something of value to share with them.

[Crowbob]

Better be careful with them customers. Sometimes they get a little rowdy like they did in the mall just outside of Milwaukee; Wauwatosa, WI. A little wilding going on, looks like.