This statement by spolsky, from my many years experience, is correct and needs to be emphasized:
"Summary: while it's fine to turn away truly toxic customers, and you are welcome to decide that you'd rather sell to the starving startup founders on Y-combinator who would rather spend 2 hours scouring your website than deal with a salesperson, the corporate customers turn out to be remarkably price-insensitive, once they make a purchase they will keep paying you maintenance for years long after the product is not even in use, and they're just as likely to leave you alone as the small guys, but they do have "multiple stakeholders" and if you want to sell to them you need a process that matches their reality."
The problem with some of the advice given on HN is that it is right and wrong depending on the circumstances. Many of the people reading that advice don't have years and years of real world experience and may take that advice out of context to their detriment. (Note I say "many" which doesn't mean "most" or "all").
the corporate customers turn out to be remarkably price-insensitive,
I haven't read all of Spolsky's response yet, but I find this comment interesting in light of the fact that the original article specifically calls out customers who ask for a discount with no justification. Okay, I can see that some places need to check all 80 boxes on their IT purchase approval sheet (I work for one of them), but if they are asking for that, AND being impatient, AND being rude, AND asking for a discount? You don't have be an accountant to see that you will be losing money on that sale. Circumstances indeed will inform choices better than rote rules, but that cuts both ways; if you suddenly jack your prices, many customers will assume you're trying to bilk them and go somewhere else.
In a lot of cases the person making the purchase won't actually care about the price, but will want to appear to care; they'd rather get 25% off $10k than 0% off $5k.
Spolsky's argument is that the sale will typically go through without a discount and thus it is not a real problem.
"Big companies often have purchasing departments actually do the purchase. They are trained to expect discounts and the people in the purchasing department know a lot more about asking for discounts than they know about software, because that is their specialized role in the organization. If you politely tell them that you have one price for everyone, they'll still purchase, because the purchasing department ususally doesn't have the power to stop the purchase."
It's not true that large companies will form the bulk of your revenue. It all depends on what you are doing.
If you are making something that every company in the world needs one of, than you will sell a lot more to the 501 through 5000th biggest companies in the country than to the top 500. (You might be able to charge those big companies a 50% or even 100% premium on various add-ons, but it won't come close to matching the other revenue.)
But that's not how software works most of the time.
With most software licensing schemes large companies are, for lack of a better phrase, gold mines.
They have more money, more users, more computers, more servers, require more support, and require higher up time. All of which you can charge them for if you license your software appropriately.
Not to mention it's usually easier to jump through hoops for one or two huge customers than it is for a hundred small customers.
Thanks for posting. Joel does outline the dynamics of an enterprise or larger sales prospect or customer. But he's also highlighting the dynamics of a toxic prospect so it's not that far from the original author's point. If you're dealing directly with procurement, if you're filling out 80 questions and returning via email, if it's a 10 person team drawing it up and giving it to Junior to go chase down...............you're not going to win the business and it's going to suck out time and worse, you may get emotionally attached because it is a larger opportunity so the team will get deflated. This author is correct either way in pushing back on these requests. If your offering is truly of interest to them they will engage in the manner you want. (which is what happened here when they kicked the original guy to the curb and someone more reasonable took over)
Never say no. EVER. I mean it. Not one single time, not under any circumstances ever. Make them say no. The way you do this is by determining just how much you would have to be paid in order to deal with the customer. It doesn't matter if it's a completely unreasonable number. Name it. Don't just presume they will refuse and turn them away. Tell them that your product which would normally cost $1k is going to cost them $50k or $100k. What have you got to lose? Worst case scenario they will pay you a giant amount of money, and you'll have a bit of a headache, but one that you have already determined you are willing to take on for the price you named.
This applies to customers, potential employers, and basically everything in life. There is ALWAYS a price. So take the gamble. Let them decide if it's worth it from their own perspective... maybe you'll get lucky!
37signals had an article a few months ago that essentially argued you should never do that. The argument went that if your biggest customer is only worth $200/month, it prevents you from getting confused about who you work for. If Coke paid 37signals $2,000,000 a month for Basecamp, it would turn into Cokecamp. When Coke takes their business elsewhere they'd be stuck with a weird product highly customized to Coke which nobody else wants. This does happen in practice--it's certainly one view of what happened with BitKeeper and Linux.
BitKeeper user here; AFAIK BitMover got $0 for hosting Linux though they did get a lot of fame. And their biggest problem apparently isn't that BitKeeper "turned into a LinuxKeeper", but rather free BitKeeper clones like git and hg (the first of which was originally created for Linux). So, just curious about your interpretation of your Cokecamp analogy; to me their problems (to the extent that they experience problems) do seem very much related to losing their biggest, most visible user, but in a different sort of way.
That's true, but it's something of a self-inflicted wound.
The release of git and hg was a direct response to McVoy yanking BitKeeper away (withdrawing the free-beer licensing terms that had previously allowed gratis use for free/open source projects); both were initially announced on the Linux-kernel mailing list as responses to McVoy's move, and each had had only a few weeks' worth of work at that point.
Before that, there had been a good deal of grumbling about the ever-shifting terms of the "don't piss off Larry license", whose increasingly draconian terms were designed to prevent the development of competitive software. (The last available version purported to bind all users to a non-compete preventing them from contributing to another SCM; I'm not sure California law would have allowed McVoy to enforce a non-compete on his own employees!) However, so long as these difficulties remained theoretical, there was not, in fact, much serious work going on to develop such competition. But when Larry revoked the license, effectively forcing the kernel developers to come up with an alternative damn quick, they did --- and damn quick.
So, the clones aren't something that the customers did when they got dissatisfied with BitMover; they're something that happened after BitMover chose, on their own, to end the relationship. Which makes them, as I said, a self-inflicted wound, that BitMover could have avoided through better customer relations management.
My impression is that BitKeeper was designed with an eye towards Linus's own habits, and my point was that BitKeeper suffered as a result. As best I can reconstruct I seem to have gotten this impression from this article:
"From the beginning, Bitkeeper has been aimed at making it easier to do development the way Linux kernel development is done. As Larry McVoy put it: 'BK makes it really easy to do what Linus is doing.'"
If you follow the links in that article, Larry McVoy doesn't really say what he's quoted as saying there, though he does make similar assertions.
BitKeeper certainly made no money on supporting Linux but I think the idea, on some level, must have been to get the software out there being used by serious programmers who would then love it, buy it, and evangelize it. In the driest sense, it was not a success. But in a wider sense in backfired so thoroughly that the idea of starting a commercial VCS project at this point is laughably absurd. Several things McVoy said turned out to be wrong, even though they must have sounded plausible at the time. I'm particularly pointing to this one:
"All you people trying to copy BK are just shooting yourself in the foot unless you can come up with a solution that Linus will use in the short term. And nobody but an idiot believes that is possible."
So, it probably isn't the best analogy, but on the other hand it was the first one that came to mind. :) I'd be curious to know what you think about this, and more importantly what your opinion of BK is today and how it compares after having a decade to mature.
I've found that dealing with certain situations/people is not worth any price that a person might pay.
There are people who are just unbelievably unreasonable, mistrusting, and impossible to satisfy. These types can take you off course, reduce morale, harm your reputation, and generally almost "break" your company. As a small boot-strapped, but profitable company, I would rather expend our efforts on finding and supporting good lower-paying customers who are happy with our service and with whom there is a mutually beneficial relationship.
As they say, "money isn't everything", but even to the extent that one focuses solely on money, it's not always more profitable longer-term, even with a customer who's willing to pay an outsized price.
There is not a price that is worth dealing with toxic customers. They undermine your confidence and make you resent your job. They also distract you from delivering what you promised to your good customers.
My view is that it's healthy to say "no thanks," politely and frequently.
In negotiation there is a threshold where you insult the other party. For someone you don't want to deal with this may be OK, but in general I think it's more considerate to say no than to play games with numbers.
In OP's case, if he had offered the spreadsheet guy some insane amount he probably never would have gotten any business. The more reasonable colleague would have seen the amount and scoffed, forming a poor opinion of OP's business.
It's funny we've thought about doing this in a startup I run in the real estate industry where most of our customers are realtors.
Unfortunately it's not always easy to arbitrarily raise your prices for the difficult customers because they complain even more and ask "where does it say that there will be a charge or fee for this on your website?"
I always thought it would be nice to have an extra line on my pricing page that stated "Difficult Customer Fee: $TBD" :)
The other issue is that many of my good customers have done some of the things on the 'difficult customer' list. You can't easily pigeon hole customers as 'bad'. I have only had one REALLY bad customer - he tended to swear in his email (and his password was "fuckyou"), he used various aliases, and lots of people on forums said he basically scammed them. Also he was very rude and dumb. Anyways, I decided to charge him about 5x the normal rate (and he was too dumb to notice). This is the only time I've ever done this. Anyway, he paid for a year or two and then (thankfully) went out of business.
However even my best (and nicest) customers do some of the things here...sometimes they give me a big long list of questions at their first contact, or persistently call if they have what they think is an urgent problem or question. Usually as long as they're not rude I don't have a problem with it, and they're normally pretty happy if I send an email saying I'll reply after the weekend or whatever.
I also run a business with realtors as customers and I know exactly what you are talking about, some are definitely toxic. That said, I'm sure it's not just a realtor thing but it can seem that way.
We try to detect/filter them in the sales process. Unfortunately saying "I don't thing our product is a good fit for you" invariably seems to make them want it even more.
Glad I'm not alone. Not that I'm saying all realtors are this way but we get a lot that have the "my way is the only way" mentality. It doesn't help that the real estate industry in general can tend to be a bit old fashioned. I would say 90% of all of the MLS systems I've seen require ONLY Internet Explorer in order to use it! I've never looked at any official demographics of realtors but all of our customers tend to be woman in their 40-60's that use AOL as their email address and Internet Explorer 7.
The logical conclusion is that your list price should be priced for toxic customers, and give deep discounts almost automatically to all "normal" customers.... which explains why toxic customers ask for deep discounts because they already expect to be "toxic priced".
I think this comes down to where you think the greatest return will be. Ultimately it comes down to time. If you can make more over the long-term serving a few high-paying customers, do this. If you can make more serving many smaller customers, do that. Unless you have a sizable organization, it is hard to do both and keep everybody satisfied and your company focused.
Yea this is what we do. Estimate how painful and time-consuming this client will be and price the sale accordingly. That $200 a month product we sell? For you, just $50k upfront for setup and training and $100k per year for support and licensing. Sometimes they turn out to be good clients after the initial pain.
One thing that has really surprised me is how little you can tell about a customer based on their initial email. When I get an angry or rude email, about 95% of the time they will turn into a polite human being once I respond calmly with help for their problem. A lot of people just do not expect to be able make contact with an actual human or to get any useful help, and are angry from the get go because of this. The article mentions "disrespectful & abrupt" emails. For me this extends this to include "angry and hateful." It is truly amazing the 180 people can do once they are talking to a person instead of an anonymous customer support address.
I think it is that they have usually reached a high level of frustration before they email and it all comes pouring out. The lack of expectation puts them off writing until they have reached the edge.
We got one yesterday. Had a list of changes he expected us to make for our app. Most were really redundant and outdated ideas. I wrote responses to each portion of his email: yes, no, maybe...
I got to the last paragraph: if we made all of the changes he'd be happy to bump up his rating of our app to 3 or 4 stars. At that point I deleted everything I wrote and instead politely brushed him off and offered a refund.
I get this all the time. My strategy is to respond honestly about whether any of the changes they are suggesting are coming and why I have decided not to add them if they are not, and when it comes to the rating bribery just ignore the fact that they mentioned it. Also popular: "I will buy your in app purchase if you add/change X" (So tempting! A whole 99 cents you say?).
Interestingly with this treatment I have not noticed these customers being any more trouble than usual as a group. They usually seem very happy to get an honest response from a real person. Even though behavior like this irks me, I think it is mainly a symptom of the fact that you often have to try so hard to be heard by customer support these days.
This is why it's best to avoid line-by-line negotiations. Wait until everything is on the table, see what the offer is, and go from there. If you aren't interested in the end result, you can save yourself a lot of time. If you are, it allows you to figure out the things you care most and least about, and apply flexibility accordingly.
Sounds like this guy has never dealt with any Indian prospects, which notoriously exhibit many of these characteristics. Our most recent lead, which was a subsidiary of one of the largest companies in the world, involved dealing with one of the most painfully disrespectful employees in procurement that we've ever dealt with. After giving them an ultimatum that we weren't going to sign their agreement and that they could take ours or not sign at all, another employee at their company finally stepped in, apologized, and signed.
Fortunately, the more qualified leads we've encountered and close in the area tend to exhibit only a few of these traits and are generally much more respectful, but prosecting is still quite different from the US.
I don't see why asking for a discount is so toxic. We ask for a discount on every transaction with a 3rd party our business makes and more often than not we get one.
It seems like most business to business transactions start with the "dummy price" out the gate.
Because it's usually the people who feel that they're entitled to a discount no matter what, who also feel that they're entitled to white glove service, support calls after hours even for trivial questions (with 10 minute turnaround), similar discounts off their already discounted price, special features written just for them.
Oh and they get to stamp their feet and hop up and down with rage and send shitty emails when you don't live up to their expectations.
And they also usually do this to all of their other suppliers and customers too, which means that they tend to go out of business without warning, still owing you money.
> We ask for a discount on every transaction with a 3rd party our business makes
I'm curious to learn why you do that? On "contact a sales person" type sales I can understand but you use the term 'transaction' which implies you are doing this on self-service purchases.
Most self-service businesses are setup to streamline (ie avoid) human-interactions which would also suggest they are honestly pricing their goods/services. By contacting them for a discount you're already increasing their CAC before you then ask for a discount too.
If you have sticker-shock on the price because it's not offering a return value to you or you cannot afford it then you're probably not a target customer. That's why I don't go into the Ferrari dealership and ask for 10% off.
> Most self-service businesses are setup to streamline (ie avoid) human-interactions which would also suggest they are honestly pricing their goods/services.
This doesn't follow. It shows they are concerned with reducing their costs, not that they will pass those cost savings onto the customer.
Don't ask, don't get. If you are going to be a solid, profitable customer for a business, they have a clear incentive to get you on board by sweetening the deal.
People build self-service businesses because they don't want to build a sales team and/or be able to keep their price point competitive.
If everyone emailed in wanting pre-sales and discounts the price would go up because there would need to be a sales team to service the requests.
I'm telling you that as someone who runs such a business that has both self-service and sales-led products that are priced differently (partly) for that reason. (that business is hosting the OP site as it happens)
I don't think it's as big of an issue as you suggest. If you've spent umpteen hours developing the product, the amount of additional time and effort required to put a simple discount system in place is negligible.
You could even set up a standard response email. If someone writes asking for a discount, just send them a ~10% discount code.
It should pay for itself in the form of (even slightly) increased conversions in no time.
That's why the article talks about looking for "2 or 3" warning signs rather than just one. Just about any customer can show one of those warning signs and be a perfectly acceptable customer, but when they have several, they're almost certainly toxic.
It's unfortunate that businesses do this. Starting off a relationship with a new customer by effectively
saying that your pricing isn't 100% honest seems like the wrong way to go about it.
I want every one of our customers to be 100% confident that they are paying the same price as anybody else on the same plan. In our case, I've even explicitly refused to do any deals or promotional discounts. This keeps things simple for us to keep track of as well.
I don't think the author meant to imply that asking for a discount is toxic. I think he was saying that if combined with several other behaviors, it may be a red flag.
Anyone who has worked selling...anything, can understand where you're coming from. There are some real d-bags out there, and some will end up as potential customers.
But as a guy who has been on the other end of these calls, far too often, I can sympathize with wanting some directness. I can't tell you how many times I write an inquiry to a company with some basic questions, and next thing you know I'm bombarded by requests to get me on a sales call. I don't have time; phone calls are inconvenient, emails are not. I've done my research, please answer my questions so I can decide whether to buy your product or not.
That's my approach now. I try to be as cordial as possible, but I ask direct questions, usually via email. If you can't answer them, I can't buy what you're selling.
I've experienced this both ways. Usually when I'm looking for business products or services they are more likely to want to do an annoying "sales call" but I've also experienced this as a business owner. We try to offer a very simple service where customers can sign up online and find all of the information they need on our website. However we still get customers that will literally email us and ask us to call them (as if they can't call our toll-free number) so that they can literally ask the most basic questions.
The worst is when they ask us to "send them a proposal" or "when you can have a conference call with us?".
We work with clients in the real estate industry, real estate offices, builders, etc... I think certain industries are accustomed to working certain ways or just follow the traditional "corporate attitude" of meetings and conference calls.
If you really want a low-touch, low pain customer base I think the industry you choose is also very important.
It looks like internal politics at the prospect were at play here. The guy didn't want to be doing this and decided to take his bad attitude out on the vendor he was assigned to deal with.
The point about asking questions you can get from the website definitely rings true. We had a customer ask us about 15 questions, the answers to which were all on the website on our features page. He then asked for us to walk him through the installation of our app and a demo. After 30 minutes, we had to cut him off.
We'll definitely be on the look out for these types of customers going forward - and the cost definitely outweighs any sales we would get from these toxic customers.
The customer did sound like a hassle, but by the sound of the author I think he could have admitted ways he could have improved his customer support.
- Multiple Questions that Can Be Answered from Your Website
Improve the accessibility of the questions, educate the lead/customer on its location.
- Asking for a discount
Whether you like to haggle or not, there are people that think part of the buying process requires a haggle. Have a trivial bonus you can award to your haggler so they feel like a winner.
- Carpet bombing info@ sales@ questions@ support@ and etc..
These emails are impersonal, people want to talk to real people. If you aren't a big company use your name or if you want a generic account that everyone can use just make up a name: jason@yourcompany.com
- Calling your cellphone multiple times
If you don't want to phone support. Don't list your cellphone on your website. If you have to list a number go buy one that goes to an answering machine.
- Email Ping Pong
If you're lead/customer is getting frustrated with every back paddle of an email you send back its possible you aren't communicating in a way they understand or your not giving them an answer they'd accept. You don't have to give them the answer they want just one they get.
Right-on! These scenarios are sadly straight out of real day-to-day life in a successful business.
The colleague one is classic, or worse yet, you're called by the 'expert' himself who trivializes your product yet somehow is calling to buy it.
Top of my list though is this: Customer negotiates again after delivery. "I want a refund unless I get convoluted feature X for free, or $Y off the price."
Don't be afraid to fire a customer just to improve your quality of life. Bonus points for describing your direct competitor as a perfect fit.
Finally, for sanity's sake, never give out your personal cellphone number. If you must be "reachable," use something you can block off-hours.
I feel like I read about some of our customers in post and comments. 10% of our customers generate 1-2 percents of revenue, and 70-80% of support emails (all urgent), phone calls, complaints to quality of service, requests to implement tons of custom features for them, e.t.c, e.t.c.
Am I the only founder here who enjoys the challenge of a toxic customer? Make the deal, sign a short term contract, then drop communication. A customer is only toxic when they know they have leverage. My strategy: build up a false sense of leverage during the deal cycle, then at the end DHV and threaten to pull away, close the deal, and make em feel like you did them a favor. Never say no. Never charge a higher price. Get the customer first, and then make them want you, not hate you.
In regards to the specific example of the 80 question doc, I would've simply replied "sorry, I'm not experienced enough to answer these, then tell him to wait to hear from another sales manager, then circle back in 3 weeks seeing if he got his questions answered (even though you know he hasn't). He's happier than getting a "no", and his boss will wonder why the purchase hasn't happened yet. Delay, delay, delay, and let the customer come back to you. That is the filter. No use in prematurely judging a customer and potentially losing business forever. Don't less SaaS economics ruin the salesman's tact. It's all we got left.
>But asking us to drop our price by 25% or 30% just for kicks is not typically a sign of an outstanding customer.
Disagree completely. Repeatedly asking for a discount over a long period of time for no reason, maybe. But just asking for a discount at the beginning or out of the blue seems to be a wise tactic in financial transactions.
If I ask for a discount the worst they can do is say no, and very often they say yes and I pay less. If I ask and they say no I and I push it and they're firm about not giving a discount, great - I'm paying a fair price that we're both happy about. If I ask and they lower their price, great - they lowered their price and now I'm paying a fair price that we're both happy about. Just seems to be part of the game you play...
I work with a SaaS product, and we've noticed that almost every customer that asks us for a discount right off the bat tends to 1. Have a low LTV and 2. Not be a good fit for us support and headache-wise. Just our experience.
There are some valid reasons for asking for a discount, such as plans to buy a large quantity of licenses, pay for a year in advance, the company is a charity, non-profit, school, etc. If the request for a discount didn't have some sort of justification like this then I still wouldn't write them off, but I would probably make a mental note.
Regardless of the size of their company, some customers will never be content unless they bend you over backwards so far that you're losing money on their business. They want to get more value than they paid for. Whether that's because they don't appreciate the value of resources they consume, or it's intentional, I can never tell.
On the flip-side, the weird thing is that these difficult customers can also wind up being your hugest fan. It can be a real love/hate relationship!
I know I shouldn't feed the trolls, but I find these one or two thoroughly killed comments at the bottom of threads fascinating and you actually seem to have other, mostly reasonable posts.
What is this post supposed to accomplish? What actual message are you trying to convey? What about this article made you feel compelled to write a one-off insult and nothing of substance?
http://news.ycombinator.com/item?id=1987223
Definitely worth a read alongside this article.