Saturday, October 10, 2009

It's funny until someone loses an account

Interesting thing happened this week at PSMJ...for the last several years we've used the same company to do our credit card transaction processing. Their services are behind the scenes and about as commoditized as you can get. Other than the transaction statements they send to our bank, we never hear from them.

We were approached by another transaction processing outfit that is going to deliver this commodity service for lower fees and they demonstrated how they can save us a couple thousand dollars a month. We called the first company to tell them we were switching over at which point we got a message asking us to consider their counter-offer and to give them an opportunity to keep our business. I am not going to consider it and here's why:

First, I am a little angry because I feel like these people have been ripping us off for years. We've been loyal customers, you'd think they'd want to take care of us. When I do business on a commodity service, I want to be made to feel I have a choice. Second, the sales rep for the new company is my boss' nephew - so not only are we getting a special deal from the new company, we're getting it from someone with whom we have a connection.

Remember, don't get fat and happy with your client base. Treat them like gold because no matter what you think, you really have no idea how tenuous your bond may be.

Until next time,



Bill Wallace said...

Hi Bruce

Good post and interesting view. Interesting because the service is a commodity. As such, maybe the provider is also treating you, the client, like a commodity.

But it raises the question about all the anomalies with long terms clients:
1. why do "new" clients get the discounts to join while long term clients continue to pay premium prices?
2. why do companies spend money attracting new clients rather than rewarding longer term clients?
3. would you argue that PSMJ delivers on your argument?


PSMJ Resources, Inc. said...

Hello Bill,

Great points all - and more for us to think about.

Discounts for new clients are always problematic. They condition new clients to expect the discounted price going forward. On the other hand, asking clients to pay less does minimize the financial risk of buying a product or service. A/E firms should think about reducing scope along with reducing price. Value-added services can be quantified and whenever possible, should be held back from new clients - but it should be made clear why they are being held back. Long-term clients that pay top prices should get as many value-added services as possible so they know that they are paying more, but getting much more.

PSMJ research shows that the typical A/E firm spends 80% of its marketing budget on getting new clients and 20% on existing clients. Our research also shows that nearly 70% of clients leave firms because they did not feel like they were being taken care of. Business development strategies need to re-allocate their budgets to turn existing clients into their best marketers. Clients tell a better, more genuine story.

Does PSMJ deliver on this argument? In some ways, yes I think we do. All PSMJ buyers can call us with questions about anything and we do whatever we can to provide additional information, advice, or guidance. We also offer buyers discounts on other products they buy. Firms that use PSMJ consulting for strategic planning or in-house training get free subscriptions to the newsletters and other publishing products. We also create special reports and papers that we offer exclusively to buyers. We are always wrestling with this and we are always looking to improve the experience for our best clients.


Bill Wallace said...

Hi Bruce,

Good response.

I do find it very interesting that, since I have been in this space for the past 20-odd years (mostly "odd"!), is this passion about marketing to get NEW clients and not looking after the current ones as your research suggests.

For those that do get it right, more power to them.

Keep up the great posts.


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