11:07 PM 4/18/1997
Firms should view customers with discernment
By DAVID FLAUM
In 40 years as a contractor, Charles Avery got burned two or three times a year by people who didn't pay him for completed work

Now retired, Avery handled a job recently for his daughter's company, Avery-Gilliam Homes, that matched some of his experiences in business. The owner of the home refused to pay the final $1,200 on the job -- for items added by agreement during the project -- claiming the work was not done to his satisfaction. The company is still trying to collect.

Avery has experienced worse in his career -- customers he called "total deadbeats" -- and he suggested an agency such as the Better Business Bureau, which keeps track of complaints against businesses, also could keep tabs on consumers. In the meantime, he and other business consultants say there are ways business owners can avoid, or minimize, the financial damage from less-than-desirable customers.

For example, on your first contact with a customer, ask how he or she plans to pay for the order, product or service, says Jack Farrell, chairman of the Memphis chapter of the Service Corps of Retired Executives.

If the payments will be made over time, you should check with a credit bureau in the customer's home area to find out if the person is a good risk to pay and pay on time.

If the customer makes a special order, you should ask for a down payment and verify the financing arrangements the customer is making to pay the rest of the bill.

Market research, marketing techniques and customer service policies all can be used to screen out bad customers.

First, define the type of customer you want to serve, says Donald Fisher, executive director of the Mid-South Quality Productivity Center. To do that, you must understand your product or service and its strengths and weaknesses, he says. Then you can match that information with the type of customer that will most likely use what you have to sell.

In many types of business, you can't control the kinds of customers that come through your door even by narrowing the target audience for your message. But you can compile information on their habits to set policies that may drive away undesirable customers.

In retailing, for example, you can profile customers by asking for their professions, educational backgrounds, income, merchandise return habits and other characteristics, Fisher says. This can be done with questionnaires or postcards sent to customers.

Merchandise return habits may be especially important. For example, says Fisher, in one jewelry store he worked with, many teen-age customers returned purchases within three days. "It cost us a lot of money to sell to that market."

In a business that sold women's clothing, customers buying evening dresses would often return them the next day after wearing them once. In such cases, a business owner must set up policies to deal with such trends and minimize the costs, Fisher says. For example, on returned purchases, the retailer might allow only exchanges for other merchandise or store credit, rather than cash refunds or a credit to a credit card.

Business owners may fear losing customers by taking such actions. But, Fisher says. "Some customers are too expensive for an organization to have."