The 250 Square Foot View

I came across an interesting Harvard Business Review article this morning called “It’s Time to Fire Some of Your Customers,” in which the author, Anthony Tjan, describes a scenario where a business pares its customer base by only focusing on the most desirable customers, its “super loyalists,” which effectively means “firing” the low-potential customers. From the article:

Some businesses exhibit the classic 80/20 rule, with their top 20 percent of customers making up 80 percent of the revenue. We have also seen a good number of firms with even more skewed revenue distributions that are closer to 90/10. Yet organizational efforts and resources are often poorly mapped to, or unaligned with, that revenue distribution pattern. In fact, it is often the opposite. That is, the bottom customer quartiles take disproportionately from a company’s sales, marketing, and customer service resources. Some of the most challenging customers are those who in the “low-middle” bucket, buying relatively little, but needing very high touch and maintenance.

When I read the HBR article, I automatically thought of a coffee shop owner I know who’s very serious about customer service. I reached out to him to find out whether he’s ever had to “fire” any of his customers, and coincidentally, he had a customer experience to share.

Recently, some of his customers had figured out a way to “game the system” regarding his pricing. Instead of purchasing an iced latte—two shots of espresso with milk, served over ice—these savvy coffee drinkers were ordering espressos over ice in large cups, and then pouring their own milk from the milk-and-sugar station. Essentially they were getting all the same ingredients but at a lower price. According to the owner, he was actually losing money on these drinks because these customers were pushing the milk costs back onto him.

Eventually he figured it out and readjusted his pricing. He says that based on the change, some of those customers raised a stink at his store and have either stopped coming in or begrudgingly paid the new price. He thinks some people will always be hatching the next great coffee scam to game the system again, but that he’s not spending too much time worrying about them.

Back to the HBR article. The part about the most challenging customers who don’t spend a lot but are the biggest pains in the ass? That’s me. I wouldn’t consider myself a “super loyalist” at too many places, but I’m the first to ask to speak to a manager, or send back a beer that doesn’t taste quite right, or write a scathing Yelp review, or share my thoughts about a poor customer service experience on my blog.

In a post last month I wrote about a bar crawl in which I only drank at bars that offered a free drink for just one Foursquare check-in, and the lukewarm customer service I received as a result of my low-potential customer status. It’s obvious to me now that like the iced latte bandits, I too have been fired as a customer many times.

I have one more similar customer experience to share regarding a very popular dining program: NYC Restaurant Week. As many couples do, my girlfriend and I occasionally like to splurge for a decent meal, and Restaurant Week affords us the chance to have a fancy dinner for a little less than what it would cost normally. For $35 a head, restaurants include an appetizer, entrée and dessert—alcohol is not included. Inevitably, the food will be tasty and the night will be fun, but when the bill comes, the $70 figure I had in my head at the start of the meal (that’s $35 times 2) has suddenly ballooned to around $135 after alcohol, tax, and tip.

Unlike the much maligned Groupon deals that have many small businesses complaining about a lack of profitability (often due to a lack of repeat, full price-paying customers), the concept of Restaurant Week got us to spend as much—and possibly more—than we would have otherwise.

Had we ordered our exact same meals (again, appetizer, entrée, and dessert) off the regular dinner menu, my food would have come to $54.50, so in theory I saved $19.50 by ordering from the RW menu. But my girlfriend’s meal would have come to just $39, merely a $4 savings. On a regular night, we may have ordered just one glass of wine at $11 apiece, but the implied savings from the RW “deal” had us feeling like we could order two each and still make out on the deal. In the end, we had a tasty (though hardly mind-blowing) meal and a fun night, but the RW promotion didn’t really do us any favors.

I think it’s safe to say I’ve been fired as a customer of that restaurant, and possibly fired from all of Restaurant Week. And I’m sure I’ll be fired by many more establishments in my lifetime, but the good news is there’s no shortage of businesses of all shapes and sizes in NYC, and eventually I’m bound to be hired somewhere.