The price of a relationship
I found myself in an unenviable position recently, caught between loyalty to a service provider and an irresistible offer.
I had an established relationship with my current provider and had no complaints or issues. The service and relationship were good enough that I would happily provide a recommendation. But the offer was irresistible. My mental calculations had worked it out to be several hundreds dollars of savings. It was a clever offer that was intended to cultivate a long term relationship. The sales person was personable, professional and very convincing.
From a marketing context, I admired it. It required a financial commitment from me and there was urgency as there were only two places left. If I didn’t take it then, I would miss out. Then he sweetened the offer by reducing it even further and extending the redemption period, effectively wiping out all my rational objections. I stress the word rational because everything else was emotional.
The irresistible offer, the urgency, all common discussion points with my clients. I laugh to think how I personally reacted to it! Clearly, it works, because in spite of the gnawing discomfort, I accepted it. But there is more to this story.
The gnawing discomfort of my decision stayed with me the rest of the day until the following morning. I turned it over and over in my mind, justifying it from a rational point of view but could not fault it. The problem was that I liked and respected my service provider and my loyalty was being brought into question.
Price vs Loyalty
That loyalty had been built over years of good service. It was based on being surprised many times and one of the key points that I want to discuss, which is that the price point was perfect. It was well within my “reasonable” zone.
I could not help but compare this to another occasion with apparently similar circumstances. I was a happy satisfied customer and had also recommended this provider’s services to others. The difference was the price point. In the second story, the price had over a number years started to creep into “pricing stress”. It tested my loyalty and when he raised his prices again, it tipped over into the unreasonable zone” so I started shopping around and once another service provider was recommended, I left.
How do you price your services appropriately?
Some people would argue that there is no price for loyalty but there is. It depends on whether your pricing is well within what I call the “reasonable zone” or whether it’s in the “pricing stress” zone. It’s not about being cheap. It’s about being reasonable for the level and quality of service you provide. The higher the level of service and quality, the more flexible your “reasonable zone”.
This is information you need to work out. It’s not an exact science. You can measure your business against competitors, work out when you stand in terms of both your service and your price.
Did I leave?
Did I leave the first service provider? No, I did not. Tortured by my guilt, I asked for a refund the following day. I could not emotionally justify leaving. It was not just the years of service, the quality of service, although most people in this situation would argue the first two. I believe it is the first two AND the value I get, which comes back to price. The price I pay is well within my tolerance.
The lesson here is that under-cutting your competitor does not work if your competitor is already offering “value for money”. You would have to prove “value” which takes time and a risk on the part of the buyer. In a service-based business, extremely difficult to achieve.
Naturally, from a business planning and strategy point of view, there are many other issues to cover that are beyond the scope of this post. However, hopefully, this has been some food for thought as you go about your business and developing your pricing strategies.
- The Irresistible Offer (book review)
- Are You Earning Customer Loyalty, Or Are You Buying It? (forbes.com)
- If You Want Loyalty, Get a Dog? (firstdigital.co.nz)