How to Avoid Problem Clients

Use these 4 client archetypes to identify problem clients before you work with them.

Problem clients

At some point, most freelancers, consultants, and executives realize that there are just two types of clients:

  1. Ideal clients,
  2. “Less than ideal” clients

Now, whether you’ve got your ideal client pinpointed, or you are still in the process of figuring it all out, it helps to have a simple guide that you can use to find more awesome clients while minimizing your exposure to problem clients and I've got just the guide to share with you below.

Let’s get into it.

A Difficult Decision

Back in 2006, my first business was just getting off the ground when I was faced with a difficult decision.

You see, after months of 80-hour work weeks, my business had grown to ~$4,000 per month, but I was utterly miserable.

I was spending most of my time putting out small fires for just a few problem clients.

The only problem was that this handful of customers also made up the majority of my income which left me with a difficult choice.

Should I keep things the same and continue being miserable?

Or should I cut the dead weight and find a way to make up for the money?

After a couple days of deliberation, the answer became clear.

The problem clients had to go. [1]

Who Is My Ideal Client?

As fun as firing problem clients may be, I was now faced with the issue of replacing my lost income and replacing it fast.

I decided that it was time to get serious about which customers I wanted to serve and which ones I didn't.

I started with a simple observation: I wanted more customers who were focused on results instead of price.

This meant that I would need to completely rethink my marketing strategy and focus on how my customers perceived me.

No longer could I be the "generic" provider. It was time for me to tailor my marketing and communication strategies to attract the type of customers that I wanted in my business.

After a complete overhaul of my website, new marketing material, and a 400 percent price increase, my business was finally on the right track. Within six months of those changes, my business was making $6,000 a month.

Finding the Right Type of Customers for Your Business

Looking back, I feel super fortunate to have been through this scary time.

But I really wished there was a simple guide that I could have used then to help me figure it all out. And so, to help fill that void for other entrepreneurs, I've decided to create this guide.

When thinking about your clients, I find it's best to think about them in these four major categories. (Note: This is for B2B. If you do B2C business, this graphic is for you.)

Cost vs results

Irrationally Free: These clients are the bottom of the barrel. High maintenance, demanding, but, most importantly, they are focused on how they could get the same results for FREE if they weren't using you. Avoid these customers, they are a nightmare.

Price Shoppers: These clients are focused on how they can get the best deal so they will probably try to haggle with you. Overall, these clients are a mixed bag and can be great if you are just starting out. That said, if you don't consider yourself a low-cost provider, I'd avoid these clients.

Value Seekers: These clients are focused on how they can get good results at a fair price. They actively see the value your business provides. These customers should make up the bulk of your business because, generally, they respect both your time and theirs.

Give Me Results: These clients are focused on results. If you are the best in the field at what you do, these are your dream clients. These clients can be extremely lucrative because results trump all other concerns, but they can be very demanding.

Choosing Your Ideal Archetype

As you look through the archetypes above, my general advice is that you should tailor your business and marketing approach to serve the Value Shoppers.

In my experience, Value Shoppers are the easiest to serve, cause the least amount of hassles, and truly value the work you do for them.

There are only a few cases where you'd explicitly want to target the other archetypes, but that is outside of the scope of this guide. If you have specific questions, feel free to drop them in the comments.

Three Rules to Attract More Value Shoppers

Here are my top three rules to get you set on the right path towards bringing more Value Shoppers into your business. I'm sure there will be a lot of pushbacks from some of these, but my suggestion is to test them out before anything.

Rule #1: Set High Prices — They Set Expectations of Value

When I talk with most entrepreneurs, my typical advice is that they should raise their prices. Why? The reason is simple:

Prices set expectations of value. (click to tweet)

Interestingly enough, I often get quite a bit of pushback from this advice.

“Oh no, I couldn’t do that… What if…”

I’ve always found this pushback to be so interesting mostly because I was the same way when I started out.

Initially, I was scared that higher prices would mean fewer customers. But, after raising my prices 400 percent, I found that, while higher prices do mean fewer customers, generally, they are more profitable and enjoyable.

What Does Your Price Really Mean?

Today, I like to think about price as three key things:

  1. The expectation of value that is going to be delivered to a client, 2) A great filtering mechanism to repel “cost-focused” consumers, and 3) How much revenue a company will make per sale.

While I could bury you in academic research about the effects of pricing,[2][3][4][5] the one concept you really shouldn’t be overlooking is that of anchoring.

Essentially, anchoring is as follows:

When evaluating the value of a product or service, we will initially place much more emphasis on the first price we are exposed to.

This is why, when you put a $3,000 pair of shoes next to a $300 pair of shoes, the $300 pair seems much more reasonable.

Do yourself a favor and read the Wikipedia entry of anchoring[6] then detach yourself from the emotional worry of raising your prices and try it out for a month.

Practical Tip: If you aren’t willing to raise your price, at least try to use anchoring to your advantage. For example, on your customer inquiry form, use a price drop-down to let clients set their preferred budget. Strategically set your lowest price to weed out “cost-focused” customers and make sure to include budgets much higher than what most people spend. This will help set the expectation that you are competent when it comes to playing at a high level.

Rule #2: Never Match Prices, Ever!

In my email marketing business, I found that three of my former problem customers were on a custom agreement where I had agreed to match my competitor’s price.

After firing these customers, I began to implement a rule to never price match ever again and you should do the same.

Price matching is a sign that you don't value your work and you (desperately) need their business.

Instead of matching prices, I'd suggest offering a discount if they agree to pay a large amount in advance.

If they still ask you if you’ll match their price, explain to them that you’d have to cut corners on their project in order to meet that price and that isn’t something that you are willing to do.

Practical Tip: Include the following details in your FAQ section to deter price-matching requests:

Q: Can you match prices?

A: No. [What you do] isn’t a commodity.

“A commodity is anything which there is demand, but which is supplied without qualitative differentiation. In other words, sugar is sugar. Coal is coal. Stereos, on the other hand, have many levels of quality and points of differentiation, hence, the better a stereo is, the more it will cost.” — Wikipedia

If I matched prices, I would have to cut corners, and that would take away from getting you the best results.

Also, it is worth your time to make sure you have a credible website and an excellent contact form to stand out from the crowd.

Rule #3: Always Draw Attention to Your Results, Not Yours Costs

There is a huge difference between being perceived as “low cost” and “cost effective.” Make sure that your language matches the type of customers you want.

With that in mind, your website (and the majority of your marketing) should be strategically focused on two key elements:

  1. The results you get for your clients, and
  2. The proof that backs it up.

By focusing on the stories of your other clients along with the proof that you actually got them such results, you can easily share your success stories without feeling like you are bragging.

Never forget that words tell; stories sell.

Practical Tip #1: Include something like this on your contact page:

I'm a results kind of person (link to your results page). That said, if you know just how valuable [thing that you do] can be for your business and want outstanding results, I’d love to talk with you.

Practical Tip #2: Include this (or something similar) on your about page:

I’m a results kind of guy/gal. There is nothing better than the moment when I see my client’s face as they are blown away by the results my business has delivered. This is what I live for.

Just as you are shopping for the right [thing that you do], I’m also shopping for the right clients and projects. If there is a mutual fit, I'm excited to see your face when you see the results I can bring to your business.

The BIG Take Away

If you get one big take away from this guide, it should be this:

Your messaging has a profound impact on how people perceive your business.

Imprecise messaging will result in "less than ideal" clients. (click to tweet)

It is as simple as that. If you’ve got bad messaging — or worse, no messaging at all — then you’re going to get less than ideal clients.

Focus on getting your messaging and marketing right because doing so is half the battle to attracting the right customers into your business.

Update: To help you avoid problem customers, make sure that you are using a motivation filter in your business.

Which Clients Give You the Most Problems?

I'm sure that I'm not alone in my utter dislike of "cost-focused" customers so I'd love to be able to hear from you two things:

  1. As a service provider, what is the worst customer you've ever encountered?
  2. Which of the four client archetypes did they fit into?

Looking forward to hearing your horror stories.

Until then, always keep your head up!

Nick ReeseNick Reese Signature

Reference List:

  1. Here is the "It's not you, it's me" email I used to fire my clients. ^
  2. Ariely, Dan, George Loewenstein, and Drazen Prelec. “Coherent arbitrariness”: Stable demand curves without stable preferences.The Quarterly Journal of Economics 118.1 (2003): 73-106. ^
  3. Chapman, Gretchen B., and Eric J. Johnson. "Incorporating the irrelevant: Anchors in judgments of belief and value.Heuristics and biases: The psychology of intuitive judgment (2002): 120-138. ^
  4. Tversky, Amos, and Daniel Kahneman. "The framing of decisions and the psychology of choice." Behavioral decision making. Springer US, 1985. 25-41. APA ^
  5. Anderson, Eric T., and Duncan I. Simester. "Effects of $9 price endings on retail sales: Evidence from field experiments.Quantitative Marketing and Economics 1.1 (2003): 93-110. ^
  6. Wikipedia entry on anchoring ^
Published: 2013-10-16