Everyone talks about the toxic customers… the ones that complain all the time, take up all your resources, demand free things in exchange for not complaining, and generally make your life as a business person hell. It’s relatively easy to fire the toxic customer, I think. I’ve done it a few times as a consultant, and it gets easier over time at least.
But there’s one thing that no one ever talks about… something that I’ve come to think of as the 2nd worst email that your business will ever send:
Firing the customer that you love.
Building A Relationship
It’s late 2013. I’m searching twitter for a few select keywords regarding podcasting, looking for people with whom I can engage conversation. My goal is to help others get up and running with a podcast, answer questions, and generally be a valuable resource as they are starting out. It’s how I attract customers at this early stage in SignalLeaf’s life.
And there they are… the perfect person for me to help. A person in a music scene that I have been involved in before; someone that has knowledge of sound, recording and production; a podcast that is going to be started soon, with a mission that I fully support and want to be part of, but is not yet set up anywhere. So I reach out. I ask if they have any questions about podcasting specifically… about hosting, about RSS feeds, about the fine details of getting a podcast online. A few tweets back and forth leads to email exchanges. More questions emerge from the emails, and it quickly turns in to phone calls. I spent probably 5 or 6 hours total, doing research, answering questions and providing the information they needed to get their podcast up and running correctly.
I was ecstatic when they said they wanted to use SignalLeaf for hosting even after we had talked about their concerns with using a new, unknown player in the arena. It was going to be great… and it was great. SignalLeaf grew in new and exciting ways, with the traffic that this podcast generated. Business was good and growing through sponsorship messages with them.
And then I asked them to leave SignalLeaf, offering to help them migrate to another service.
The Harsh Realities Of Customer Success
In most business, the success of your customers typically brings in more income and more customers for you. When someone uses your service a lot, they buy in to more features, higher priced plans and word-of-mouth referrals that bring you even more happy customers.
Podcast hosting is a commodities business, to a large extent. It’s file hosting and bandwidth providing. Having a hugely successful customer when you’re a podcast host can present a few interesting challenges, though. When a podcast is explosively successful (gaining 15,000+ listens on their first episode, and moving in to the 30K to 40K listener range, per episode, in 6 months) it costs a lot in terms of bandwidth.
Even now, in 2014, bandwidth is not free. Yes, it’s cheap. At $0.12/GB, I can serve a few thousand listens per episode on the average podcast, and not worry about exceeding the monthly subscription rate I am charging for that podcast. But when you look at my last post on figuring out where the bandwidth charges are coming from in my Amazon S3 account, it’s clear that the bandwidth costs can quickly destroy your bank account and far exceed all income from all customers, for a podcast that is genuinely gigantic in its listener base.
Asking Them To Pay Or Leave
It took a few months of ignoring the cause, eating the $600 to $800 per month bandwidth bill and driving my credit cards to their limit for me to realize what I had to do. Yes, this podcast was bringing in new customers through SignalLeaf sponsorships. But sadly it wasn’t enough new income for me to absorb the cost, let alone remain profitable. So I did the only thing I could do…
I contacted the people that run the podcast, explained the situation to them (in detail – leaving nothing ambiguous) and asked them to either find another host or pay for the bandwidth.
This was especially difficult for me, as I believed in the mission of the podcast, found it to be thoroughly entertaining and was proud to be at least a man-behind-the-curtains part of what they were doing. But I had to do it, because I was going to end up bankrupt if I didn’t.
Ultimately, they chose to move to another host and I respect that decision. I worked to make sure the migration from SignalLeaf to the new host was as smooth as possible. I made it as easy for them to leave as it was for them to get started with SignalLeaf. I certainly hope that the effort was appreciated, even as I was escorting them out the door in to the arms of another host.
Some Interesting Lessons In Business
Lesson #1: Allowing your customers to exceed your income with their use of your system is untenable. “Really? NO!” – yup. I know. It’s basic math that even I can do in my head. And it’s a problem that has befallen more than one company in the last few years. I’ve read stories about “freemium” photo sharing services that tank and shut down in the face of 30,000+ users of their service… when customers don’t pay for bandwidth in a bandwidth/commodities service…
Lesson #2: Sponsorships do work… but you have to target the right audience with the right message. The audience for this particular podcast was very large, and I did manage to pull in some new customers through the sponsorship. But I can only imagine how much more effective the sponsorship would be if SignalLeaf were in the same market space as this podcast… if SignalLeaf were sponsorship an entrepreneurial podcast, or a podcast about how to podcast for business, etc.
Lesson #3: Your favorite customer might be your “worst” customer. While it’s true that I loved what this podcast was about and want to support them, I was allowing myself to be taken for a ride and lose my shirt in the process. They may have been one of my favorite customers from a personal perspective… but they were a “bad” customer from a business perspective. I just didn’t want to admit it.
Lesson #4: If I had been in contact with them from the start, about the cost of hosting their show, there’s a chance that we could have worked out a better arrangement. But when it came down to it, I presented the problem too late and gave them an almost ultimatum email. Shame on me for that, and I’m not surprised they chose to go somewhere else. I only hope my grace in helping them move was noted on their way out.
An Interesting Lesson In Podcast Hosting
In an effort to help the podcast that I was booting out the door, I contacted a few of the other podcast hosting services; the big dogs; the 8,000lb gorillas in the room. I’ve had contact with them before, so it was easy for me to get directly in touch with the right person. I asked questions about what the costs of hosting this particular podcast would be, informed the services of the downloads per episode, average file size, etc. I brought all of this information back to the people running the podcast and they made their decision based on the information I presented to them.
And you wanna know something REALLY interesting about the podcast hosting industry? Every podcast hosting company out there will ask you to pay for bandwidth.
I honestly didn’t know this, before. I was under the delusion that these services were providing unlimited bandwidth to even the smallest paid plan. It turns out this isn’t quite true, even if other services directly advertise unlimited bandwidth. The thing they don’t advertise in very large writing (but it’s there if you look hard enough) is that the “unlimited” bandwidth comes at 1 of 2 prices: sponsorship or cash.
Most of these services don’t care about the meager traffic that your podcast generates. It’s like a gym membership… you sell more subscriptions than are being used at any given moment. But when you get in to the kind of traffic that a podcast host cares about, then you are moving in to their “professional” services. At this level, they will either ask you to use their sponsorship program or ask you to pay for the bandwidth. In any case, you end up paying for the traffic… whether it’s paid for with cash or with sponsorships.
This is probably the most valuable lesson for me, in all of this. This gives me new insight in to how to properly structure pricing for SignalLeaf… how to present it not as unlimited, but as one option for paying for the bandwidth that your podcast will use. I’m still struggling to define this completely, but it’s giving me a lot to think about and work with.
SignalLeaf Is A Better Service Because Of This
In spite of the cost associated with this podcast, they had a direct influence on the quality and stability of SignalLeaf. I probably wouldn’t have as robust a service as I do, without having served 20K to 40K of episode listen each week, for the last 6 months. I’m grateful for the opportunity that I had in hosting this podcast. I want to see nothing but the best of luck in their continued and growing success. I wish I could have found a way to turn this situation in to a profitable scenario for SignalLeaf… but it is what it is. I’m looking for the lessons that I can get from this experience. I’m doing what I can to improve the service. And I’m 100% certain that I lived up to my ideals of always helping the podcaster, to create a fan and someone that advertises for me, even when they choose to use another service.
P.S. I called this the 2nd worst email that your business will ever send. So what’s the first? I’d have to say the worst email you’ll ever send (and hope you never have to) is the “we’re shutting down” email.