Question

Topic: Customer Behavior

I Offended A Customer And Got Myself In A Mess! :(

Posted by ziczacxann21 on 2/2/2011 at 6:44 AM ET 500 Points
I am a distributor of an imported European product in 2 countries - Australia and New Zealand (these countries are just examples, they're not facts). I have offices in both countries.

I have a customer (a retail shop) who has a shop in Australia and he has been buying from me and he pays well, but the only catch is that he wants me to send the goods by air freight from New Zealand, and then he will import it. I have totally no problems with this arrangement at all since I have offices in both countries and I have stock in both countries. And he states clearly that he is willing to pay all expenses incurred in this special arrangement. He has been very nice and I like him as a customer.

However, the problem is, he sells the products to end- users way too low the recommended price. I already told him many times the maximum discount that he can give his customers is 15%-20%. He's very nice to say OK but then again we catch him selling at 30-50% discounts. My other customers in Australia are very unhappy and accuse me of selling to him at a cheaper price. This is not true. I sold to him at the same price as I sell to all other customers in Australia and New Zealand.

Many end-users in Australia also ask me why this particular shop is selling so cheaply...and at my wits end, I told the end user, "Oh he imported it from New Zealand. He did not buy from Australia". That's it, that's all i said.

Then the news spread and now everyone says that my customer is a parallel importer, importing from the grey market in New Zealand, that's why he sells so cheaply. The consumers also say that this shop is not an official dealer, coz he did not buy from me (the official distributor in Australia)
The thing is that nobody ever linked to the fact that I am a distributor in both Australia AND New Zealand...so they thought that this guy imports from the grey market in New Zealand. Nobody ever thought that this guy was actually buying from my New Zealand office.

Now my customer is offended because it is a fact that he bought the goods from me, and he doesn't understand why I said that he did not buy from Australia. He is upset that I did not acknowledge him as an official dealer. He's upset but he is always very nice so he doesn't blow it up, he just quietly stop ordering from me.

What should I do now? I tried many times to reconcile with him by telling him that if he gets the goods directly from my office in Australia, i will immediately make an advertisement to say that he's an official dealer. I also pointed out that if he gets the goods directly from my office in Australia, he doesn't need to spend additional unnecessary freight charges and import duties when he imports from New Zealand. Moreover, he doesn't have to order many if he orders from my office in Australia, just a few pieces and we can send free of charge. But somehow (I don't know why), he insist that he wants to buy from my New Zealand office.

Now I know he has totally cut me off coz he has removed all my products from his website. Actually I have all the rights to cut him off as a customer because he has breached the agreement by selling lower than the recommended price. But I really like him as a customer and would like to continue business with him.
What should I do now?
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RESPONSES

  • Posted by mgoodman on 2/2/2011 at 10:00 AM Accepted
    I'm with BARQ and NuCoPro. You don't want this customer. He's bad news, and you've let him get away with flagrant abuse of your policy in the past.

    Now the strategy should be to help all your remaining customers pick up the business that your abusive customer is going to lose by not having your line available.
  • Posted by Frank Hurtte on 2/2/2011 at 11:21 AM Accepted
    First, dont feel bad - your situation isn't all that rare in the distributor channel. The previous comments are indeed valid. In some ways you may have brought this on yourself by not inforcing your own distributor contract. But, now back to the real world....

    A great customer is still a good customer. Here's how I would approach him. First, keep the lines of communication open. You can do this by phoning him and saying - "You know, asside from this business agreement - I have always liked and admired you. Business is important, but maintaining a relationship with you is more important. Could we get together sometime (at a tradeshow, while you visit his city, etc)?

    You need to decide if selling your brand at a discount is a critical part of his marketing plan. Does he sell other brands well below the regular market? Does he have customers of his own, or is he known as a low price poacher? How does he fair when the playing field is equal?

    Once you better understand him - you need to make a couple of decisions: 1) does he have a place in your channel plan? 2) does he do such a good job that you are willing to support his discounting?

    My guess is he would respond immediately if you dropped your price ... but I am not certain of the cost of that move to you.
  • Posted by michael on 2/2/2011 at 11:28 AM Accepted
    This is a face-to-face issue. Your primary challenge is to sit down with him. If he doesn't want it, then you walk away knowing that you were at fault (hey, we've all been there)

    Once you get that face time you fess up. Tell him you were completely at fault. You felt cornered because his competitors were all after you about him selling below the market price. Tell him that, in retrospect, you should have handled it differntly (you might want to give him an example of how you would handle it) but that you value his business and want to know if there is a way you can earn his business back AND have him abide by the agreed pricing.

    If he says no, you're done....but never bad mouth him. Don't share prorietary information. Remember HE didn't abide by your terms anyway.


    Michael
  • Posted by Peter (henna gaijin) on 2/2/2011 at 3:07 PM Member
    Something seems to be missing here. Parallel importers are doing what they do because there is a cost benefit to doing this. They are playing on cost differences between countries to game the market.

    What you should do is make sure you understand what is happening here. I would figure out what price the importing customer is paying after all his costs are taken into account (what he pays you, what he pays to import, taxes, duties, etc.). Then do the same for the ones you sell directly to in Australia. If you do find that the guy importing from NZ to OZ does have a lower cost structure, then you do have parallel importing happening and your OZ customers do have right to complain as they are at a disadvantage. If in the end the customers are getting the product at the same cost structure no matter whether they buy in OZ or NZ, then it would likely not be considered parallel importing.

    The other aspect is whether the OZ customers are given territories. If they have exclusive or semi-exclusive territories, then this distributor importing from NZ could be giving them competition.

    Of course, there is also the question of the NZ folks not following your rules. This alone could cause problems, and in the long run will possibly cause you to lose either the NZ importer or the local customers in OZ. Something you will need to fix.
  • Posted by ziczacxann21 on 2/2/2011 at 8:28 PM Author
    Thanks for your comments everyone.

    This customer is really difficult to understand what's going on in his head. He never want to tell me the reason for wanting to import from my New Zealand office instead of getting directly from my Australia office.

    His cost of transport and import duties all add up to make his purchase price more expensive, so I really don't understand why he wants to spend this unnecessary money.

    One thing is that, he sometimes use my products as a "promotional item" in his store. He sells his products XYZ at no discount and gives the end-user a big discount off my products to make the end-user happy. (my products and XYZ are complimentary products)

    I've been feeling very bad about not acknowledging him as an official dealer even though he really bought from me. But looking at the comments from everyone, I'd be better off without this customer.
  • Posted by darcy.moen on 2/2/2011 at 11:13 PM Accepted
    Look, you should start to accept the fact that not everyone is going to be your customer. Its a common delusion that 'the customer is always right', they are not. Some customers are not worthy to be your customer.

    Look at it this way, if this was your wife giving it away on the side, how would you feel? You be filing for divorce pretty quick, wouldn't you?

    Just because a customer hands you a sales order and money, that alone does not qualify you as 'a great customer'. Great customers don't go around rules and cause you to lose face with your other clients. Rules are rules, and those who cannot abide by them need to be brought into line, or shown the door.

    Sure, you are going to take some lumps cleaning up this mess, but you will likely gain favor with your other clients who DO follow the rules. Start by firing the client who cannot follow the rules. Cut him right off, and quickly. Then, apologize to your other clients. Admit your mistake. Don't offer an excuse, don't try to water down your apology with your reasons you've already stated here, simply admit that you made a grievous error in judgment, you have rectified the problem by going back to your original policy, and you are sorry for your actions. In time, again issue a statement to your other clients re-iterating your position and the rules. Keep on following up with your other clients, and in time, you'll find that they have checked you out and confirmed that you've taken your lumps, learned, and are now following your rules to the letter. I would expect that these folks would forgive you your error, and resume ordering.

    It takes a strong and sturdy moral fiber to stand up to a customer. It takes even more to stand up to a paying customer, even if it means taking a hit to the pocket book. It takes a very strong person to be able to take short term pain for long term gain. It takes time to build your business and business relationships so you can afford to lose clients of any value, but its a goal worth working towards. I wish you well on your journey to get there.

    Darcy
    Customer Loyalty Network
  • Posted on 2/4/2011 at 12:33 PM Accepted
    Sounds like XYZ company enforces their minimum pricing policies and he is using your product as a way around it.

    Your reputable customers will benefit by his exit.
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