How to Manage Toxic Customers

By Chase Hughes

Every business has angry customers or those that are abusive to customer service staff and may file unwarranted chargebacks and leave negative reviews. The common adage is every customer is ‘good’ and should be treated as such. However, one can argue that that overly optimistic phrase is also applied to all people are ‘good’ and if this were the case, there would be no need to have jails or prison institutions. Your business like a society; that may mean that you need to send your customers to ‘jail’ at some point, blocking them from your system. But how do you go about this without risking retaliation or potential reputation damage and when do you recognize it as an issue? This article identifies several points to help you manage toxic customers.

How to Identify a Toxic Customer

We should first point out that we define ‘toxic’ as doing real damage to your company for no true reason. An angry customer is your fault such as selling a defective product or service. A toxic customer is just intrinsically not good, such as they are abusing your customer service policy, overly demanding to the point at which they are not profitable, or have overly high expectations that 99% of your customers are comfortable with and fight you at every step.

If you run a business, you probably have dealt with this segment, taken them to court, fought their online reviews, and they have destroyed the morale of your company. If you’re new to the game, you should wait to have a full spectrum of your customers so you don’t think your angry customers are toxic or people are just being jerks. These are people who waste resources and do real damage to your company and are likely doing it to others as well. Common activities by toxic customers include:

  • Abuse of your return policy. Such as those that would game Amazon to get free products by claiming they were defective or not as described.
  • For service providers, those that have excessive feature creep and demand to not pay for it, so your company ends up doing twice the work with no reward.
  • Customers that are in violation of your websites’ terms and conditions for any reason such as your payment requirements or more severe circumstances of using scrapers or corrupting the data on your system.
  • Customers that are excessively abusive to your staff through severe methods that risk moral or threaten litigation. An example may include sexual harassment, excessive verbal abuse, threats, or anything that causes your staff excessive discomfort.

How to Manage the Toxicity

Please remember how we defined toxic; these customers are not standard customer service situations that can easily be fixed, but you have already gone through this process and concluded that these customers will only cause indisputable harm to your company at this point.

If you have every confronted these toxic customers, you are likely to find they react in one of two ways. If they are committing fraud, they will often immediately become silent because they have been compromised and fear any litigious or possibly criminal charges. However, some will furiously protest their innocence, in which it is best to not blame them, but a ‘third-party review’ team they don’t have access to.

The second customer, most common in cases where they are violent or upset, will just magnify their outrage exponentially, to the point where they may make negative reviews or take emotionally driven action. How you manage these customers depends on your type of product or service. Many companies will have them sign a non-arbitration and no disparagement agreement meaning that you can sue them for a breech of contract if they attempt to sue you in court or say negative things about your company publicly – slander or not. A personal client of mine has won a $75,000 arbitration case taken against a prior customer.

A less harsh way is to suggest an alternative provider for them to use and possibly provide a grace period for them to find an alternative. This is best if your service involved escrow or funds in accounts such as a merchant services provider or accounting system.

Companies everywhere must deal with toxic customers. If you have not had any toxic customers, its probably just because you haven’t had enough customers. The challenge is properly managing them because these are also the ones most likely to continue harming your company by wiring negative reviews or potentially worse such as threating your staff’s safety or the security of your other users. In the cyber world, you will find little assistance from the authorities, so you often need to take matters into your own hands and in the smoothest fashion possible to mitigate further damages to your company.

Subscribe to the Small Business Bonfire Newsletter
And get your free one-page marketing plan template.
Chase Hughes
Chase Hughes has over six years of experience helping companies prepare investment materials and raising capital. As founder of Pro Business Plans, a company dedicated to providing resources to companies during the fundraising process, he has been engaged in $3.0 B worth of collective funding across every major continent.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.