How ‘Helping’ Clients Can Hurt Your Business
A recent interaction with a client got me thinking about how doing something that seems like helping a client can later come back to hurt your business. Here’s the situation:
We’ve worked for a few years with this client. Let’s call them Client A. We were connected to Client A through another client and built a site for Client A’s former employer. Client A then went out on their own to start a new company. We built that site, too.
Because we liked Client A, we gave them a bit of a break on price, especially as they were a new business. That price break cost us some, but we figured it was worth maintaining the relationship and helping a new business get off the ground.
Once that business was up and running, Client A started another. We built this website as well. This time, the client had an even smaller budget than before, and though we wouldn’t take a site with a budget this small from a new prospect, we took this one in order to maintain the relationship and because we like Client A.
Again, the decision cost us, and the last few legs of the project were rocky because the client wanted more than the budget allowed, but we eventually launched a good site for them.
In the last few weeks, the client asked us to give a quote on a new project. We decided that we couldn’t keep giving big discounts on work for this client, because we’d done it twice already and because we’re too busy to handle that right now. So we quoted the project at our standard rates.
Client A wasn’t very happy about this price and is now using another web developer for that project. It’s possible that we’ve lost them as a client altogether, which wasn’t our goal.
And here’s the unusual thing: The problem isn’t with the client. It’s with us.
By giving those price breaks and not telling the client about them, we trained the client to expect our services at a certain price. Rather than giving this client out standard price, we tried to “help them out” and reduced our prices. When the most recent quote came in so much higher, of course Client A was surprised! That’s what we’d trained them to expect and they probably had no context to understand why the price had been raised so much.
So, by trying to help and cutting our rates in a few instances, we caused a long-term problem, may have lost a client, and have left the client feeling badly towards us. Pretty far from our original goal of trying to maintain a relationship and help a new business get a solid start, huh?
Bottom line? Giving “hidden” discounts and cutting prices to meet the client’s budget rather than charging what the project actually costs is a bad strategy for the long-term. It’s tempting to do, but as 3000K matures we’re not going to do it.
Unfortunately, we had to learn that lesson in a way that may have damaged a good client relationship. I hope that’s not the case, but perhaps it’s the price of learning and maturing. And it’s too bad.
August 14th, 2006 at 8:48 am
Recognizing a symptom, knowing the cause of the problem, and fixing it are three different things.
August 14th, 2006 at 8:55 am
Hi Rick - Agreed. The point of this post was to look at the first of those three and how it can hurt a business. But just because the focus here was only on step one doesn’t mean we haven’t thought about and worked on steps two and three.
August 29th, 2006 at 7:10 pm
Sam,
I was having the exact same pricing structure discussion with a retired MBA Professor from Univ of Michigan this morning. He was warning me as I launch my new business that initial discount pricing and special arrangments are one of the most common and more difficult to remedy mistakes new service businesses make.
With your clear sincerity, I cannot imaging that you will not get that client back eventually. Good luck,
September 9th, 2006 at 10:37 am
I learned this lesson in the last year too. Rick taught me to determine (in my first meeting with a prospect) whether the client values the “value” I’ll be providing to them and whether they are willing and able to invest the right amount of $ to solve that problem the right way. Doing jobs for less $ than I need was hurting my business, because I couldn’t invest the right amount of time to do the job the way it should be done. Now that I only take on jobs that compensate us appropriately for our time, I am able to grow my business and serve more clients. So, in the end, it’s the right thing to do for everyone.
If prospects don’t value my time and aren’t willing to invest, I am out the door. Before, I was wasting a lot more time on prospects than I should. I was writing proposals that went know where. Taking meetings with people that had no intention of engaging our services. Wasting a lot of time taking on projects that paid less than fast food wages. Of course, Rick is the expert at knowing what to do and when to do it - in the sales process. As Eric knows, he’s been training me. I wouldn’t know when to do it, and wouldn’t always have the ability to do it, if I didn’t have Rick at the other end of the line coaching me through these things. Before, I thought I could figure out these things on my own. But, looking back, I know I would have continued spinning my wheels.
January 12th, 2007 at 1:45 pm
Anyone in the consulting services sector has faced the dilemma and your essay accurately forecasts the fall out. The other no-win pitfall is giving away ideas through the proposal process in an effort to win the business. We no longer give away spec ideas; the plan and its development to include primary and secondary research is part of the paid engagement. And guess what, it hasn’t hurt us one bit (although I have a long memory for the company that ripped us off and turned over our detailed PR and marketing plan to a returning VP who they hired for guess what– the exact cost of our detailed program). The lesson is to stand up for the value of your work and your firm’s hard won reputation, and sound clients who are committed to a respectful collaboration will find you.