Episode 341 | How to Deal With Toxic Customers

Show Notes

In this episode of Startups For The Rest Of Us, Rob and Mike talk about how to deal with toxic customers. They give you some warning signs to help predict if a customer is turning toxic as well as some strategies to help deal with them if they do.

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Transcript

Rob:  In this episode of Startups For the Rest of Us, Mike and I talk about how to identify and deal with toxic customers. This is Startups For the Rest of Us episode 341.

Welcome to Startups For the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.

Mike: I’m Mike.

Rob:  We’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?

Mike: A couple of things. I’ve just pushed a major UI release for Bluetick to address some usability questions and stuff that kept coming up for people. It’s a massive improvement but it took forever to get it done. It was like a week and a half to get everything finalized, tested, and pushed out the door. It’s over and done with so I can move on from that side of things at this point.

Rob:  Congratulations. That’s a big deal. It’s over and done with for three to six months until more usability stuff comes up.

Mike: It’s done for like three days. That’s what it really boils down to.

Rob:  That’s a big deal. Congratulations. I know that this kind of stuff, it nags at you because you know it has to get done but it doesn’t exactly move things forward. It’s better than like doing taxes in terms of moving things forward for customers but it’s also not a new feature. It’s that balance of I got to push this.

Mike: Right. I think the part that made this piece so difficult was the fact that this was one of the areas that I knew needed to be rewritten for the past six months, to be perfectly honest, and I just didn’t get into it because I knew that it was going to be a hornet’s nest and didn’t want to deal with it at the time. But with that said, it’s like, I went through it, got most of the things cleared away, got all the code organized and commented properly.

Everything’s much more tested now more than it ever was before. It’s just so much easier to work with. I can go in and make changes now whereas before, I was afraid to touch anything because it might fall over and break.

Rob:  That’s good. It’s nice to refactor as well. It sounds like it was a UI improvement as well as a code refactor. That’s two wins.

Mike: Now that that’s out of the way, now I can move onto more important things like the website and getting the signup process working.

Rob:  Cool. For me, the only thing I have this week is we got a nice email from Victor Perolnick. He had listened to our previous episode where someone asked a question about resources for the engineering side of launching a SaaS. We had given a couple but it was mostly blog post and such. We did specifically say, “I know there’s going to be some out there for specific languages like if you want to do it in Rails, you’re going to find stuff. If you want to do it in PHP.

Victor called out Spark which is from Laravel which is a PHP framework for building a SaaS app. It’s spark.laravel.com. He also talked about Laracasts has a bunch of Spark screencasts if you want to see something really quick. And then link to a couple of blog posts that talk about it.

It gives you a head start if you’re going to build a SaaS app in PHP. Anyways, I wanted to call it out. We’ll link those up in the show notes. If you happen to be building in PHP, that’s probably where I would start.

Mike: I looked through some of those links that he had sent over and we’ll link them up in the show notes. The Spark system looked really nice for getting a SaaS app up and running and not having to deal with a lot of the fundamental plumbing that you would typically have to work with, the billing accounts, subscriptions, impersonation, and things like that. It looked like it was all kind of cookie cutter which is really nice.

Rob:  This week we’re going to be talking about how to identify and deal with toxic customers. I wrote a blog post back in 2010, looks like December 2010 that we’ll link up. It was called How to Detect a Toxic Customer. It actually got a lot of traction on I think it was Hacker News at the time. It has like 72 comments or something on it.

I basically walked through a case study of what I had experienced with an invoice and a customer who is quite demanding and was just really combative. I talked about how to identify them and what to do. I find that this type of thing, it comes up every 6 to 12 months. If you’re running a SaaS app, if you’re selling software, it can be a challenge. You talk to anyone who’s been selling software for any length of time and they’ve run into something like this.

We’ve talked a little bit about this in the past on the podcast but I just want to walk through these steps of how to identify really early on, because one of the keys is being able to see it ahead of the actual person getting in and starting to use your app. Because once they’re using it, it actually becomes harder to force them to switch. It’s a really tough decision to do that. Maybe not at the same level of firing an employee that you mis-hired but it is in that spectrum of like, “Man, if someone gets in and they’re really using it and being a pain in the butt, it’s hard to make them switch.”

That’s where we want to start, early signs if you’re in conversation with someone that they may not be a good fit for you even before they ever get into your app. I have a big list here, mostly culled from this blog post.

You know what the first sign is that they view their “vendors” or they view you as like, it’s this weird attitude that you’re like somehow a servant or a slave to them. They’re extremely demanding. They treat everyone they speak with as if they’re an idiot. They talk down to your support people. They talk down to you whether you’re the founder or the salesperson, just this very demeaning tone. It’s like they expect everyone to bend at their will. It’s like they’re doing you a big favor for being their customer.

Mike: I think there’s a few different pieces to this part of it. Most of the time, you can identify this type of thing in the language that they use or how they reference the types of problems that they’re running into. Whether they say, “Oh, this is a massive problem in your app.” Or “Why doesn’t this work?” They get very angry and frustrated very, very quickly and things just escalate fast to the point that they see even just little, minute problems or UI glitches and things like that as a massive problem that calls into question everything that’s underneath the cover.

Most of the time, that’s just not the case. There might be a color that’s off or something is mislabelled or the documentation isn’t quite up to date and they’ll just blow things out of proportion and what you’ll find is that the language or the tone that they take with either the support emails that they send in or the calls that they make or even just the way that they get in touch with you.

If they send you an email and then five minutes later send you another one, that’s a classic sign of a toxic customer. The way that they communicate to you is heavily indicative of how they’re going to be to work with long term.

Rob:  Yeah. I have that as a warning set number four in this article. This was an actual sequence of emails that I got from someone again with .NET invoice years ago. Warning set number four is unrealistic expectations. I got an email in support. It says, “Is your software localized for Australia?” And then literally, 10 minutes later, “I wanted to make sure you received my previous email. Is your software localized?” And then 30 minutes after that, “Hello, is anyone there? I haven’t heard back.”

It’s been 40 minutes since you emailed. This is insane. And then 20 minutes later, it was like an all caps thing of like, “Why aren’t you answering?” It’s like I have a feeling maybe I shouldn’t answer this one. If I answer the question and they spend the $300, how much more of a pain are they going to be later on? It’s unrealistic expectation, expecting everything to be answered or done yesterday.

Mike: I wonder if there’s a way like Brennan Dunn as you know is working on RightMessage.io, I wonder if you could somehow flag them and just jack up the price by like 10x to account for that kind of thing.

Rob:  Yeah, that’s awesome. I think you make a good point about little things. You’ll have thousands of customers using an app and no one complains about a bunch of stuff and then one person will just have this such an issue and like, “This is a major issue.” Like you’re saying, it’s like all caps subject lines. Everything’s a bug instead of a feature request. It’s like, that’s actually the way you think it should work but everyone else is fine with the way it works. Or it’s like this fixed rigid mindset of you should do it this way because the only way to do it or that’s the way my old system did it.

It’s a bug since you don’t match the way my old system did it but it’s like that is a point of view but your point of view isn’t necessarily the right one. Again, telling back to toxic customers tends to think that way, the language they use early on and maybe the expectations that they have.

Another thing that I’ve seen and it was funny because I used to man support with .NET invoice and so I would answer a response and then I would get this threat to escalate like, “Can I talk to your support supervisor?” “Can I talk to the founder?” “Can I talk to the CEO?” Or “I demand to talk to the CEO is another one.” It’s like, “That happens to be me. How can I help you?” That would be my response but there’s always like really? We’re going to do this because there’s one misspelling or whatever it is. Like you said, the button caller doesn’t agree with how you want it to be.

To threaten to escalate, again, not always and each of these on its own isn’t the end of the world but it’s when you start seeing multiple of these go on over the course of a few interactions, your red flag should be going off.

Mike: I think the other interesting thing about these is that sometimes, it is just one thing that you can see and say, “This person is going to be a toxic customer.” And then there are other times where it needs to aggregate. You need to have several different data points.

If your first interaction is why doesn’t this work and it’s all in caps, it’s kind of a giant red flag but then, there’s other more subtle things that you get into and they add up over time. Sometimes, you don’t see them until much further down the road. As you said earlier, that’s when things become a problem because then they’re probably already in your app, or already using it, or have already paid for it. It becomes much more difficult to cut them off as a toxic customer.

Rob:  Another potential sign of a toxic customer is that they provide way too much feedback. Every interaction with them is just a stream of consciousness of how they feel things should be different. We had people tell us like, “This word doesn’t make sense. You should rename that everywhere in your app to be this other thing. It should just say emails up there instead of broadcast or something like that.”

It’s like, “Okay, thanks for the feedback. We have four years of history of this being broadcast everywhere and that’s what all our documentation says. That’s what all of the marketing says.” It’s like everything calls it broadcast just because right now, you don’t understand that yet. In a week, you’ll know what that means and changing it to emails is actually more confusing.

I guess what I’m saying is it’s fine to get feature requests and it’s fine to get some feedback from someone but if every phone call you’re walking away with 10 different things that someone is asking for, there’s a potential there that that person may take their opinion a little, too seriously is not the right word, but it’s like they value it over your own or over the opinion of your company or your product.

Mike: The specific example that you just brought up about the name of a particular field, or a drop down menu, or just something that is presumably really just a label in the app, it brings up an interesting sideline about the fact that some people would go and say, “What can I implement and put in as a technical solution to this thing that keeps coming up where people wants to use different terminology?”

The thing I have seen a lot of apps do is allow you to rename things throughout the apps. So that instead of calling something emails for example, they’ll call it broadcast. If a customer comes in and says, “Hey, this should be called x.” You can go in and you could presumably change that inside of their user account, they would just propagate it throughout the entire app. But then, it makes it more confusing. It’s a little bit harder to support because all your documentation is probably not going to line up directly with that.

I think that you have to be a little bit careful about whether or not you put technical solutions in place for problems that are actually warning signs of problematic customers.

Rob:  Totally, it’s like if everyone request that, then that might make sense but that’s a heck of a lot of work to do for one customer. If literally you have thousands of customers, no one ever complained about the naming thing and one customer gives you 10 things and a bunch of them are naming things, it’s like, “Really? Are you going to change that?

Everyone has an opinion and you’re building for the masses and a single customer coming in doesn’t understand the context, and they don’t understand that you do have thousands of other customers. I think that’s another kind of mindset thing with the hard customers that you deal with is they don’t have any context for the thousands or tens of thousands of other people who are already using it. I think that comes back to that fixed mindset thing I talked about earlier. That there’s only one way to do it and it’s the way that I think it should be done.

Another thing that I’ve seen is someone raising the same issues over and over. I guess it comes back to that email that I kept getting about the Australian dollar. They’ll just email back with the same issue everyday or every week even if you say like, “We’re working on it.” It’s like they feel somehow this anxiety or this sense of urgency and they need to, I don’t know, continue to force it on you.

I’ve also seen multiple contacts with the same issue through multiple channels. They email you. They call you on the phone and they chat. You’re like, “You’re actually making this harder on everyone because that mixes things up. Please don’t submit the same questions.” Something about urgency and expectations. It’s expectation of turn around.

If you’re a consulting firm, then maybe they’re paying you $50,000 or $100,000 and you have someone dedicated to them. If you’re a SaaS app and you have 10,000, 20,000 customers, even big customers, they likely will not be getting that level of turnaround time on their feature request. Again, if they were a consulting firm, then yes, they’re going to build what you say. If you’re a SaaS app, you’re not necessarily going to build everything everyone suggests.

Some folks have a hard time understanding that. Those tend to be the ones with misaligned expectations that turn into toxic customers.

Mike: The other thing that sometimes you’ll see is that they will, after a very short time period with your app, they will have several pages of “suggestions” for you to change. It’s partly just a lack of education on their part because they haven’t taken the time to learn how your app works and how it compares to things that they have used or done in the past, but they feel like they know better than you do about how this particular app should be built.

There are certainly exceptions to the rule here but generally speaking, you probably know the market way better than they do especially if you’ve been doing this, running an app, for any length of time and it’s a profitable app. They’re going to come in and they’re going to base all of their thoughts and ideas around their previous experiences.

A lot of times, you’ve designed around those because they weren’t good experiences or those other apps that you were competing against weren’t doing things in a way that made sense for most of the customers and really you’ve just been pushing yourself in a position to put in bad features because of their request. Those are the customers that you’re trying to avoid.

Rob:  That’s a really good point. It’s a trip to see if you’re competing against apps and some of them will make what you see as poor design choices. Over time, you’re like, “Man, that’s pretty hacky.” Customers coming from those apps think that as the “right way” to do it even though it’s not. It tends to be a bad user experience for new customers but since they’ve been using something, they expect that to be the way, that’s the way things should be named, or that’s how it should work.

We see this with Infusionsoft to be honest. There’s just a lot of I would say questionable UX and design decisions but if you do it different than them, even in a what I would consider more modern or better way to do it, that’s much more efficient, it can confuse people who are used to thinking in the Infusionsoft mindset.

I think the last one for perhaps identifying toxic customers early is that they can expect a lot of special treatment. They’ll ask for extra services get thrown in and they’ll ask for almost always a big price break like they’re doing you a favor for being their customer. They get a price break that no one else asked for without giving a reason. There are just a lot of special favors that they can call in.

Again, if this is the only thing a customer does early on, alright that’s fine but if it’s coupled with these other things, it’s something to really be aware of and watch out for.

Mike: The big one here for like a SaaS app would be phone support or direct access to the founder which is justifiable especially in the early days when you’re the only one who is running everything or maybe you have somebody who’s doing some part time support. But it becomes a problem over time that can get bigger if you leave it unchecked. You have to cut those things off early if you can possibly help it but the people who have that expectation going in, that’s where you start running into the problems.

Rob:  Now, we’re going to switch gears a little bit and talk about potentially how to handle this. Whether you detect it early or you get down the road a bit some strategies on what to do as this type of thing unfolds. I think I’ll start by saying that hard customers, toxic customers, they will by nature just absorb and suck away an enormous amount of your time. There’s someone out there who calls them time vampires.

I’ve seen folks that will literally just demand dozens of hours a week of your time based on the number of request and the number of the hand holding and the phone calls and all the stuff. It can really be chaotic especially if you’re running SaaS. If you’re selling downloadable software, I’ll tell you something we had to do with .NET Invoice a few times. It wasn’t often but it was maybe once a year, we would refund them. Tell them to keep the software, we refunded them and we basically ran away.

We told them, “Look, for $300, one time, we cannot provide this level of support.” And then let them be on their own. But with SaaS, it’s harder because if they’re already using you platform and you didn’t turn them away in advance, you have to force them to leave, to migrate away, which is a bit harder to do. We’ve only done it a very, very few times in the life of Drip. It really sucks, to be honest.

Like I was saying earlier, it’s close to but it’s not nearly as bad as hiring the wrong person but it can be a real drag which is why you’ll want to learn to identify these folks in advance, to see the signs early on in the sales conversation and try to cut them early because you have to ask yourself, is this going to be worth it in the long run? Trust your gut. If you see a bunch of these signs, it’s easy to talk yourself into, “We can work with it.” Or “We can manage expectations.” It’s likely going to get more complicated than that.

Mike: I think there’s an important distinction to be made here between the customers who are taking up a lot of your time because they have legitimate issues versus the ones who are being difficult. I’m in a situation now where there are certain issues that are taking up a ton of my time and there are some customers who are coming to me and saying, “Hey, can you do this?” Or “Can you do that?” I don’t want to say constantly but I’m getting fairly regular emails from them.

If you go through this list, you can say, “These people are problematic customers.” At the stage that I’m at, that’s actually not the case. It’s the opposite. I’m actually appreciative that I’m getting this feedback and these people are saying, “Hey, could you do this?” Or “Could you do that?” Because it gives me ideas and yes, I’m spending a lot of time on it but it’s also pointing me in the right directions. I need that right now.

If I were 100x where I’m at right now, that might be different but I’m not, so there’s a very big distinction between where your business is at in terms of how much time you’re probably going to be spending with the customers and whether or not they are problematic customer.

I don’t have any of those right now but you could certainly potentially mistakenly view some of those customers as all of these are problematic when the reality is your app is just not quite there yet and it still needs more work and there’s still a lot of effort that you need to put into it on the front end in order to be able to cut those issues off on the back end.

Rob:  Totally. I am glad you called that out because especially in the early days, getting a lot of feature request feedback input, especially, there’s a tone element to it, if it’s not demanding. If it’s like, “Hey, have you thought about this?” Or “Hey, this would really help me out or this would be a great feature to build.” You’ll get emails like, “How have you not built this yet? I am shocked and appalled at the catastrophic way that your app does not do x, y, z. yet.”

It’s like it’s being shocked that it doesn’t, versus suggesting it as an improvement and realizing the software, especially SaaS, is an ever evolving thing, that everything is not perfect all the time, going to work exactly the way everyone wants 100% of the time. There’s a difference in tone. I agree with you. We’ve had a ton of people who give us a lot of really good feature suggestions.

You look at Brennan Dunn, he does it publicly. He does it via email. He gives us a ton of feature request, suggestions, ideas, and they’re damn good. These are things that really have leveled up Drip over the course of years. But he’s never been on that other side where he’s like, “I can’t believe Drip doesn’t do this.” I never heard the out of his mouth. It’s just this difference in attitude and tone.

Mike: A tell tale sign that they’re trying to be helpful is that if they apologize for sending feedback over. I’ve gotten that from several people where, “Oh, I’m sorry to keep bothering you with this stuff but it’d be great if you could do this or can this be done?” If they’re apologetic about writing into you for email support or anything like that, that totally puts them in a different category. They’re certainly not a problematic or toxic customer at that point. They’re the opposite.

But as Rob just said, it’s the tone of voice. You can tell from that whether or not that’s the case.

Rob:  The thing to remember here, if you do have a really hard customer who’s demanding, is you have to keep your cool, you have to be kind, you need to be honest with them, and you need to be firm. The more you give in to irrational demands, irrational feature requests, there are actually things that makes sense, and you say, “Look, we are going to build that. That’s a great idea. Let’s do it.” And the person backs off, then you’re cool. You fixed the thing.

If they continue to still email everyday or every week like, “Why isn’t this done?” Then you know, maybe you’re tipping in that other direction of it being hard. If it’s rational stuff and you’re building it, then keep going. If it’s not rational stuff, if it’s stuff that you know is incorrect, bad for the product, bad for other customers, you’ve already tried it, it doesn’t work for whatever reason, that’s where you do have to be firm and you have to separate your emotions from the conversation.

If you can’t do it, you need to have someone like a support person or customer success person who can do that. Someone who is exceptionally good at this is Anna on my team. She would handle angry customers. She would handle toxic customers. Those two are different.

Mike: She’s talked to me a bunch of times.

Rob:  Yeah, nice. Well done, Mike. But you know, you’ll have angry customers who are just angry about one thing. They get frustrated. You can smooth that over. Toxic is when they’re angry all the time. It’s the way I would put it. But Anna is really good at it. If you remember, I interviewed her, it may have been on ZenFounder actually, it was maybe 6 to 12 months ago, but we talked about dealing with negative emotions and how she was able to separate herself from the emotions coming from customers who are frustrated.

Like I said, this is by far the hardest thing to do especially if someone is making sweeping insults about you, your team, your intelligence, your application, but this is where you have to be kind, be honest, be firm, and not lose your cool, this is going to be the hardest thing to remember, and not let it derail you. Once you know that a customer is being particularly difficult, don’t let it derail your day, or your week, or your month because it’s so easy to do that.

In the best case scenario, someone who is difficult upfront winds up not actually being a toxic customer. Maybe they were just frustrated and they had several issues that you’re able to work with them, you’re able to fix them and they’re able to move on because there’s often this on ramping period where let’s say the first 30 days of using a new app, you’re confused by a lot of things.

Most of us go with it. We figure out how to use it. We don’t ask the app to change everything but some people are of that more fixed mindset. But if you handle a few of their issues and they like everything else, then it’s like you can move on and they really won’t be long term, won’t be that toxic customer.

I guess what I’m saying is often issues are clustered when someone first starts using your software. After that, they’ll calm down and people can understand how it works. That is the best case. I would say it’s not the norm but in the best case, if you do handle them with kindness, and honesty, and firmness, again, that’s the best case of coming out of this.

Mike: Something else to keep in mind with this is that dealing with customers is a learned skill. You might not be very good at it at first but you will get better at it over time. In addition to that, there are some people who just have a knack for this. Like you said, Anna seems to have a knack for it. She’s capable of separating herself from the problems and from the app itself and empathize with the customer.

Some people are better at that than others. Even if you train yourself and go through a lot of doing this type of support, and dealing with a lot of these types of people, it doesn’t mean that you’re going to be better than the next person at it or worse than them. Some people just have a knack for it and some people don’t. But with that said, if you don’t have a knack for it, you can get better at it. You can learn to separate yourself. It just takes time and practice.

Rob:  To wrap things up, we talked about the best case which is working with them early on and then being able to transition them into a productive, happy customer. The worst case of course is that you find yourself and your team just living through ongoing stress for weeks on end. There are a couple of ways to approach this.

Firing a customer is not unheard of especially with larger SaaS apps. It depends on how you want to handle this. Sometimes, I’ve seen folks just plain ignore and just say, “Look, even if this customer sends 10 emails a day, we’re going to respond once a day or once every two days to all of them.” That is one way to handle it.

Or you can fire them. If they start being abusive to you or your staff, that’s not cool. You have to protect your people and your loyalty to your people in my opinion is going to go so much further than loyalty to one demanding customer. This is a hard decision because it’s not always black and white. You can have a toxic customer that’s not abusive. You can ask your support team, are they abusive? No, they’re just a little demanding and it’s like okay, then maybe it’s not time to fire them.

But if people are really shaking up, and you feel like things are rattling around, you have to evaluate at what point you let this single person have so much control over your team. Again, this is a hard decision. It’s always going to result in people being pissed off but if you find that you’re at that point, and you feel like you’ve done everything you can over the long run, frankly, firing someone who you think could cause this level of headache for you, for months or years on end, it’s the right decision.

Again, it’s like making a bad hire. It’s not as bad as making a bad hire but once you’ve made a bad hire and you know you need to fire someone, it’s a hard decision but over the long run, you always think to yourself, “Why didn’t I do that sooner?”

Mike: I was thinking about this and trying to figure out whether or not there’s a specific turning point or a hard benchmark that you can look at to determine whether or not you should just turn the tables and cut a customer loose because. Early on, you really don’t have any history with the person so you’re not entirely sure whether or not they’re going to stick around to begin with but you probably have an idea of what your lifetime value is for that customer.

If you’re looking at that and trying to track it back to how much time and effort you’re spending with the support, that’s not the whole picture. The whole picture is actually the impact to the rest of your day. I think that that’s not something that any of us would really be measuring. You might only take 15 or 20 minutes to answer a support request but if you spend the next couple of hours with that stuff turning at the back of your brain and it’s distracting you from doing other things, the time for that to cost you weren’t 15 minutes, it was 2 hours.

These things can be exponentially more damaging than you initially realized and in some cases, you have to be able to identify those people as early as possible just because you don’t want it to get to that point where it is causing you 5x, 10x, or 50x what it is that they’re paying you or would even potentially pay you if they were to stick around for 10, 20, 30 months.

Rob:  To circle back, we’ve talked about some signs to look out for. We’ve talked about what to do. Hopefully, you’ve heard that the best case is that you can actually work with someone and help turn them around. I guess that would be hopefully something you can shoot for if you do find yourself amidst “toxic customer.”

Mike: With that, we’re going to wrap up for today. If you have a question for us, you can call in our voicemail number 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com.

Our theme music is an excerpt from We’re Outta Control by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for “startups” and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.

 

 

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