Customer Deterioration | There are companies that have sales but are struggling only at the operational level

Customer

Companies that are struggling despite having sales are not losing customers, but are losing the quality of their customers.

When a company starts to struggle, many people question the sales.
Is it that sales are insufficient?
Are there not enough projects?
Is the order intake weak?

However, the companies that are truly in danger still have sales.

They have projects.
Contracts are continuing.
At first glance, the numbers are there.

Even so, only the operational level is struggling.

Support requests increase.
Exceptions increase.
Small feelings of discomfort that are just short of complaints increase.
Even though no one is clearly angry, only exhaustion accumulates.

Companies that treat this state as just being busy are the ones that start to break down.

The problem is not that there are customers.
It is what kind of customers are increasing.

Having sales and having a healthy customer base are different things.
In fact, in dangerous companies, the customers supporting the sales are sometimes quietly destroying the operational level.

Customer deterioration is not a story about declining sales.
It is about feeling relieved by looking only at the amount, even though the content of the sales is worsening.

Symptoms

When customer deterioration begins, what happens first is not a major cancellation.

There are orders, but the burden per project increases
The ratio of exception handling increases compared to the number of inquiries
The contract terms remain the same, but the actual demands increase
Operational differences between customers widen
The operational team starts saying, "This project is heavy"
The top-tier customers in terms of sales cause the most internal depletion
There are additional orders, but no profit or margin remains

Even though no one can clearly call it a failure, only exhaustion increases

At this stage, it can still be justified within the company.

"It's a large account, so it can't be helped"
"It's just a special request for now"
"It's necessary for the customer's success"
"It's not bad if sales are being generated"

Of course, there are phases where you need to go deep with truly important customers.
But what is dangerous is when that explanation becomes the norm.

In companies where customer deterioration is progressing, the relationship with customers is not deepening.

The boundaries are broken

Companies that do not look at this mistake the maintenance of sales for health.
And they begin to absorb the exhaustion of the front line through "hard work."

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A scene from the front line

At one company, I once compared a list of top-selling customers with the issues being reported from the front line.

Looking only at the numbers, it wasn't bad.
Major customers were remaining.
The retention rate was not low.
Sales were also growing.

Therefore, the meeting materials looked quite good.
However, the words heard from the front line were different.

The operations for this customer alone are too specialized
There is an increase in support outside of original specifications
Consultations outside of the contract have become routine
The amount of support varies depending on the staff member's enthusiasm
Every time, a "just this once" situation occurs
Even though the sales are large, no one wants to be in charge

The most dangerous thing was not the number of complaints.

It was that the more important and large-scale the customer, the more "it can't be helped" became the internal consensus

Moreover, that exhaustion is hard to see on the surface.
This is because they bring in sales.

Sales departments find it hard to cut them off.
Management also wants to protect them.
The front line cannot fully voice their complaints.

What happens as a result?

The customer remains.
The sales remain.

But only the margin on the front line disappears.

At that time, what I thought was dangerous was not the customer themselves.
It was that the company had become unable to decide which customers they should deeply engage with and which customers they should draw a line with.

Customer deterioration is not just a problem of the other party's quality. It is also a problem of having become unable to decide how far you will commit to providing value.

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Why it happens (structure)

Customer deterioration is dangerous not just because troublesome customers increase.
It is dangerous because the company can no longer distinguish between sales and health.

There are three reasons.

1. The size of sales distorts the evaluation of customer health

Many companies look at sales first when evaluating customers.
The larger the customer, the more important they are.
The longer a customer has been with the company, the better they are.
It is easy to judge that way.

However, what is truly necessary is not just the sales amount.

Is there profit remaining?
Are the man-hours commensurate?
Are exception requests increasing?
Is there a negative impact on other customers?
Is there enough value to compensate for the exhaustion of the front lines?

Companies that do not look at these factors begin to protect bad customers based on the size of their sales.
And they begin to set priorities based on the customer's amount rather than the customer's quality.

From that moment on, even if sales are being made, the substance of the business deteriorates.

2. Companies that cannot draw boundaries are eroded by customer demands

Companies where customer deterioration is progressing appear to be customer-oriented.
In reality, they are not customer-oriented.
Their boundary design is weak.

Where is the scope of the contract?
What is value provision and what is an exception?
What should not be accepted?
Where should we switch to an additional contract?

If this line is ambiguous,
Customers expand without malice.
Sales accepts because they want the deal.
CS takes it on because they want to protect the relationship.
Development responds because they were asked.
Management tries to make ends meet later.

In other words, customer deterioration is not just a customer problem, but also a problem of the company being unable to maintain its boundaries.

3. Confusing customer success with over-adaptation to the customer

This is the most dangerous part.

Good companies are serious about customer success.
That is why they get deeply involved for the sake of the other party.
But that seriousness can turn into over-adaptation.

Cannot say no when asked
Do not want to lower expectations
Do not want to cause dissatisfaction
Want to protect them because they are a major client

When these feelings pile up, the company begins to "absorb" rather than "support."
Instead of solving the customer's problems, the company starts filling in for the customer's own operational or preparation deficiencies.

However, that is not customer success.
It is merely filling in for the customer's lack of preparation with your own company's man-hours.

When it reaches this point, customer deterioration is no longer a relationship issue.
The business model itself is beginning to be dragged down by the weight of the customers.

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How to judge

When you see this state, the first thing you should do is
"strengthen customer support"
is not it.

It is not about increasing CS.
It is not about making the front line work harder.

What you should do first is separate which customers are generating revenue and which customers are eroding the organization.

You should look at the following five points.

1. What is the status of man-hours and exception handling for top-revenue customers?

2. Which customers require the most out-of-contract support?

3. Is there a common thread among customers that the front line feels are burdensome?

4. Which customers provide additional orders but leave no profit?

5. Where is the line drawn between customers who should truly be protected and those who should be cut off?

What is important here is not to "cut off all burdensome customers."

What is needed is to distinguish, even among burdensome customers, where value is being provided and where there is over-adaptation.

Therefore, the judgment is as follows.

First, list sales and man-hours by customer.
Next, identify exception handling and out-of-contract support.
Re-evaluate customer health based on the difference.

Create criteria for drawing boundaries.
Prioritize a healthy customer composition rather than maintaining sales.

What needs to be done in the phase of customer deterioration is not pandering.
It is selection and the resetting of boundaries.

Companies that cannot draw the line here will suffer more as sales increase, and eventually become labor-intensive.

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Result

If you can treat customer deterioration as a structure at this stage, you will be able to review the content of your sales.

You can see which customers are healthy.
You can see which customers are draining the front line.
You can see which relationships should be deepened and where lines should be drawn.

In other words, before chasing sales, you establish criteria for which customers to keep.

Conversely, if you proceed with "we have sales" here, the company will deteriorate further.

Accommodating difficult customers,
accepting exceptions,
absorbing it on the front line,
and losing the margin for other customers.

And in the end,
"We have sales, but for some reason everyone is exhausted"
is the state you enter.

But in reality, you are not busy.
You may have just been justifying a bad customer composition with the amount of sales.

This is the turning point of customer deterioration.

It is not about whether to protect sales.
It is about whether you can distinguish which customers will make the company stronger if kept, and which customers will wear the company down.

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Criteria you can use tomorrow

1. Always look at man-hours and exception handling for top-revenue customers

A large customer is not necessarily a good customer.
Look at not just sales, but also profit, man-hours, and front-line burden side-by-side.

2. Do not let the concept of a "heavy customer" remain just a feeling

If the front line says it's heavy, articulate the reasons through out-of-contract handling, operational differences, and demand density.
Understand it through structure, not emotion.

3. Do not confuse customer success with over-adaptation

Getting deeply involved is different from accepting everything.
Support that cannot draw boundaries will destroy the business in the long run.

4. Prioritize a healthy customer mix over the amount of sales

Customers who strengthen a company are different from those who wear it down.
Companies that cannot distinguish between the two will struggle more as sales increase.

Customer deterioration is not about the customer being bad.
It is a state where you have become unable to distinguish which customers, if kept, will weaken the company.

Do not gloss over this with the amount of sales.
That will become the next standard.

This burden does not stop here.
Next,
"Labor Intensity | [Business] A business that gets harder as sales increase is already broken"

If you read this,
it will connect where a company that tries to grow while holding onto a bad customer mix ends up making the business itself heavy.

If you also read what I wrote in the past,
"[Management Strategy] (4) Marketing is not 'customer acquisition.' 90% get the order wrong"

you should be able to see from an even earlier stage what kind of customers you are attracting in the first place.

This series is designed so that you can follow the order in which a company breaks down through business, organization, and accounting.

Please follow me if you want to keep up with the rest of the series.

If your company is showing similar signs, I would appreciate it if you could 'like' this so you can look back on it later.