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The Mistake of Making Assumptions About Your Customers and How to FIX IT
In this post we are going to look at the fatal mistake we often make when making assumptions about customers and how one company fixed them and avoided failing.
In the world of entrepreneurship, there are many cases of failure based on the fact that the entrepreneur "smelled" a possible unattended market niche and assumed that since there was no competition, he was in the presence of pure gold.
He launches in a hurry and after a short time and sometimes after having "burned" all his savings he realizes that, for some reason, which he still does not understand, the business does not work.
Something like jumping into the void without a parachute. Does it ring a bell?
In a nutshell we have failed to analyze whether there is a real demand for our product.
1. Waiting too long before talking to your clients about their debts
Time is, without a doubt, a decisive factor in the debt collection process. We often see that the longer invoices remain outstanding, the more difficult it is to collect and the less likely they are to be paid.
Additionally, many businesses do not pay until they receive a payment reminder. They count on their suppliers not to worry about payments. In this way, they pay late to providers who remind them and do not pay providers who remain silent.
That's why you should be contacting your customers the moment they default on their payments.
You should not hesitate when asking them to honor their commitments.
2. Prepare for interaction with your customers
Your customers may or may not be aware that they have not paid you. Since you are the one contacting them, you are expected to be the one to explain the situation and lead the way to a solution.
You should prepare at least the following before contacting each of your customers.
The numbers of the invoices pending payment and their expiration dates. You can resend the invoices to them by email to avoid excuses such as not received, lost or forgotten.
The customer's payment history. If they are new customers, tell them about your credit policy and debt collection process if you haven't already done so, so they are aware of your position on late payments. If they are paying late for the first time, find out what caused the change so you can correct it. If they have paid late multiple times, check to see how previous debts were settled and whether their payment practice has changed over time.
Your debt collection activity to date. Have you contacted the customer before? Has a new agreement been reached? Has the client complied with the agreement? Each of your collection attempts should reflect what has already been done and what the next step will be. This not only helps you move forward, but also prevents your customers from using the same delay tactics again.
3. Ignoring the reasons for late payments
There are always reasons for your customers to withhold payments. They usually won't tell you or pay the amounts owed until you ask why.
To make sure your customers are telling the truth about the reasons for the delay, consider asking two types of questions.
Questions about small problems that can be solved quickly. For example: Is the invoice correct? Can you use the payment methods we offer? Do you have all the information you need to pay us?
Questions about important issues that require negotiation. For example: Are you satisfied with the products and services provided? When and how do you want to make the payment? Do you have any other problem that prevents you from paying us?
It's important to listen to customers, rather than make assumptions about them.
4. Getting carried away by your emotions or giving in to the feelings of your customers
Having to remind someone to pay and being reminded to pay are situations that can trigger strong emotions. Your cash flow may be in jeopardy, but your client's business may also be at stake. Despite the sensitivity of the situation, it is best to maintain a friendly but firm and objective tone throughout the collection process.
If your clients lose their temper, stay calm and wait for them to calm down before returning to negotiations. If this doesn't work, end the negotiations and let them know you'll get back to them once they've calmed down. This often yields better results than delving into feelings rather than debt.
5. Leave your customer engagements to chance
More often than not, your customers' commitment to paying outstanding invoices depends on your determination to collect them. Everything you do or don't do indicates to your clients your attitude toward debt collection.
Throughout the collection process you should make it clear that paying late is unacceptable and that you are determined to recover the debts as soon as possible.
Have a written agreement for each next step. Whether it's setting a new payment date or negotiating a payment plan, get your clients to commit in writing. These written agreements form the basis for all your collection activity later on.
Set deadlines for everything. Once you have agreed on the next step, you should also put in writing when that step will be taken and when you will follow up. This way your customers will be less likely to delay the process.
Contact your clients as soon as deadlines have expired or there has been a breach of any agreement. If you don't, every day you wait will be another day that your customers don't pay you, while they think it's not a problem for you.
6. Not being one step ahead
Even if you reach a new agreement with your clients about repaying debts, there is no guarantee that they will stick to it. To avoid wasting your customers' time, you need to have a back-up plan B for every deal you make with them.
For example, if a customer misses a new payment deadline, see if you can work out a payment plan with them. If they don't meet the payment plan, you may be able to hire a debt collection agency to put more pressure on them.
How you present Plan B depends largely on where you are in the collection process. If you have just reached the first agreements, it is better not to disclose the existence of the plan by reserving it for negotiation. If your clients have broken multiple agreements, it is best to let them know that you have a plan B in order to demonstrate your willingness to collect on outstanding debts. However, keep in mind that if the situation occurs, you will have to carry out your plan B so that the client takes you seriously.
7. Do not resort to debt collection agencies
There are no shortcuts when it comes to collecting debts. The time, effort, skills, and discipline that the process of successfully collecting overdue invoices and maintaining a good business relationship requires should not be underestimated.
If collecting your outstanding invoices is taking too long or you don't have the staff to do it, consider seeking outside help.
An experienced and professional collection agency with the right approaches can encourage your client to pay while maintaining your business relationships.
With Atradius Collections, you can use the online service to:
Know immediately how much it will cost you to collect your pending invoices. Get a free estimate here .
Have a team of professionals around the world willing to help you.
Check the progress of the collection process in real time.
The assumptions about their consumers were wrong.
The clothes were well received at the store but sales were few.
When financial problems began to jeopardize the fledgling company, Joe decided to stop and try to figure out where he was wrong. For this, nothing better than consulting current customers.
Since Vuori also sold through its own website, it decided to contact everyone who had purchased its products by sending them a questionnaire. Among a dozen technical questions about the type of fabrics they preferred to practice sports, one asked them to comment on the other activities in which they used the brand.
To confirm these results, he organized focus groups with his friends, colleagues and gym acquaintances. And the answers she received opened her mind even more.
It found that “Unlike women who like to be identified as yogis, men prefer to be identified as surfers or crossfitters even if they practice yoga.”
For the men, yoga was a complement to their activity as surfers.
And regarding the store feedback that they had received his proposal positively, also misunderstood them.
Regardless of whether the store owners considered men's yoga clothing a good idea, after yoga class, men do not stay to see clothes in the stores associated with the gym and therefore do not buy them.
At this point Joe was convinced that he had made assumptions about his potential clientele and had guessed wrong, and he realized that it was time to refocus the brand strategy.
Reorienting the brand strategy
“Great clothes for a great lifestyle and that consumers decide where to wear them”
From then on, Vuori grew from a men's yoga wear brand to a men's sportswear brand designed with West Coast style in mind.
And instead of categorizing its clothes by sport, it offers the following collections: active, travel, running, training and yoga.
The interesting thing is that he did not eliminate any garment, what changed was the focus, instead of focusing on his intuitions, he focused on the client and from there, of course, he reoriented communication with the client.
But there is more, following another surprising discovery, the entrepreneur began to experiment cautiously in the female market.
This exploration responds to the “complaints” of many clients who commented that their wives and girlfriends “raided” their closets in search of those garments.
At the moment it only offers a few garments (shorts, t-shirts, leggings and little else).
Believing that there is no competition in a market and launching without a deeper exploration can lead us to make mistakes that are sometimes insurmountable.
Although there is a market segment that is not yet served, it does not mean that there is a potential business. IF potential clients do not perceive a need to be satisfied, there will not be a business opportunity there.
Do not make assumptions and investigate to see if there is a actual demand for your product It is essential to develop a business.
And finally, it is worth noting the Importance of having a means of direct communication with the client: a blog, an ecommerce, a newsletter, a Facebook group, etc., are all opportunities to build a database from which you can communicate directly with the customer, conduct surveys, etc.