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SUMMARY: A customer is satisfied with the quality of services she received but realizes, after the fact, that other service providers charge less. Although there is a difference in the quality of services between the providers, the customer has a hard time seeing it and is now mad at the service provider and wants a fee reduction. Should the provider give her a reduction? Would it really change her mind that the provider tried to take advantage of her? Are there other ways to salvage the customer relationship? If so what?

CONTEXT: I own and operate a very small business (250k/year sales). We sell professional services to individuals, not businesses. The average customer will purchase our services 2 to 3 times in their entire lifetime, and our average invoice is around $6,000. We're in a highly competitive industry with a great many competitors and, as is often the case with services, customers tend to see all competitors as the same. Although our services are not a commodity and I certainly don't see them as such, many people have a hard time differentiating the services of one competitor from another.

It is my strong belief, and I do have some concrete data to back it up, that we offer a better quality of service and achieve better results for our customers than even some of our best competitors and definitely much, much better than our average competitor - the barrier to entry in our industry is relatively low and there is a considerable amount of low quality low-cost players. Accordingly, our fees tend to be higher than those charged by the competition - sometimes 25% to 50% higher than the average competitor, and 5% to 15% higher than some of the best alternatives. Unfortunately, the nature of our business and our services are such that sometimes, the better we are at our job, the harder it is for the customer to see the value in our services (holy %$?! that seemed easy, quick and effortless, why the hell am I giving you so much money?)

PROBLEM: We just finished doing some work for a client that was referred to us. She was referred to us because we have a good reputation in our area and do great work. We talked with this person on the phone, asked her some questions to better understand her needs, sent her a very thorough information package containing our entire service offer, fees, contract and information about our business. We then met with her and signed the contract. Everything went well, we provided her with great service and obtain some great results for that customer. At the end of our mandate, she filled out our online customer survey and gave us a 9 out of 10 in every category.

A few weeks after we were done with the work, but before we are scheduled to receive payment, she gets in touch with us to say that she is mad and feels like we took advantage of her and that we charged her way too much. See, a few people told her that she could have hired some of our competitors for less and she now feels stupid that she didn't shop around and trusted the person that referred her to us. Though she has not directly asked for it, she is hinting that we should substantially lower the amount of our invoice and basically admit that we took advantage of her.

MY TAKE: I feel bad that the customer feels the way she feels and I am sad that what was a pleasant customer relationship turned sour after the fact. It's as if she purchased a BMW or Mercedes, thinking that those were the only cars available, not realizing that there are Toyotas and Hyundais in the world. Now that she realizes that there are Hyundais and Toyotas, she feels like she overpaid for her Mercedes. (They all have 4 wheels, seats and take you from point A to point B, don't they? I got screwed!)

I can't help to think that offering a discount would be an admission that we tried to screw her over (which is absolutely not the case, we offer premium quality services and results, at a premium price) and really, would not be enough to change her opinion of us. A full refund, in this particular case, would represent about 8% of our total forecasted 2017 revenue. I don't want her to start giving us bad word of mouth but at the same time, I'm not sure that the cost to prevent that is equal to what we may or may not lose in potential sales if she ever starts to badmouth us.

QUESTION: Is there anything we can do, that would stand the test of a cost/benefit analysis, to save the relationship? If so, what?

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    Abstain from repaying anything, as the signal would be: "haha, we got you, you paid so much that we don't care giving back a part, and after all our work wasn't so good!". What you can do instead is to propose a (reasonable) rebate on the next job, "to reward loyalty". – Harry Cover Jul 20 '17 at 7:40
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Personal opinion... don't engage too much. If the relationship is damaged, then it's damaged. Get paid and move on. Too much discussion will only inflame issues. In addition, any reduction not cited in the contract shows your willingness to not adhere to the contract itself. This could be interpreted as a failure in the agreement from its inception. The client's lack of due diligence on their part does not mean your company should suffer damages. Once this perception is set in a customer's mind, it really unlikely you can overcome it without serious price reductions of "freebies" and that, in turn, means the customer will at least attempt to get a reduction every single time.

Hi [client], I regret that you may have misunderstood the agreement you signed. All fees were clearly indicated before any work began and at any point prior to engaging our services you were free to comparison shop with other firms/service providers in an effort to save costs. Everything were were hired to complete was stated up front and above board. There are no hidden fees and certainly no attempt to take advantage of or otherwise reap some unhidden benefit from this business relationship. The contract clearly indicated the work to be done and the price for those services. We traditionally expect our clients to adhere to the contract which has been signed, much the same way we ourselves value the contract as a binding agreement.

You're analogy using cars is a decent one. Imagine what the BWM dealer would tell this customer if they wanted a reduction in price to match a Toyota after the sales contracts had been signed?

  • Great points. Auto sales contracts, at least here in California, specifically do not offer a "cooling off" period to assauge that old fashioned Buyer's Remorse. – Xavier J Jul 5 '17 at 22:15
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Neoflash,

If a customer's #1 motivation is to get a service done as cheaply as possible, then you can't fix that whether you are at the pre-service stage, performing the service, or done with it. You just got lucky that it didn't come out sooner. I hope you've cashed any checks from this customer and aren't sitting on them!

That same customer can't call their electric company or mortgage company and try to beat them down over prices already agreed to. Similar attempts won't work at the supermarket, or lots of other places that your customer will frequent even over the course of a week's time.

So really, all that's happened here is that your customer has sensed that you're a little vulnerable in the area of standing on your price, and is now trying to capitalize on that. Don't fall for it! If you're used to repeat business, PLEASE let this one go. If you allow this customer to nickle and dime you, even after-the-fact, every other interaction will be tinged with the same dynamic. Is is worth the stress and headache? Choose wisely!

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I'm going to play devil's advocate, I guess.

The comment,

the better we are at our job, the harder it is for the customer to see the value in our services (holy %$?! that seemed easy, quick and effortless, why the hell am I giving you so much money?)

causes me to raise an eyebrow. Maybe it's a tactical error, but what are you doing letting your customers see you make it look easy?

Also, you talked on the phone, sent her an information packet, met her to sign the contract, and ...

If I'm paying thousands of dollars for what is essentially personal services, (professional, okay, but for individuals, did you not say?), I'm going to want face-to-face. Otherwise, it's going to be hard to convince me you aren't giving me something canned, and a canned solution ought to be cheap. (... cheap being defined by your competitors' lower prices.)

If you really are confident of the value your version of the services provides above that of your competition, letting your customers see you work should be a tactic to avoid this kind of problem. It gives them more of a sense of the value of what you provide and it gives you more opportunity to customize what you give them. (Customizing can only add to the delivered value, I think?)

As a sort of metaphor, say I sell you a kilogram of gold bullion in a plain brown wrapper sent by package express mail. If you don't complain about the delivery method, you're likely to say to yourself, "lead." And, "Hornswagglers. Lost cause." And you give up and put it on a shelf where it gathers dust. And the value I intended you to receive is not delivered.

For the present case, and this will apply even if the customer turns out to be a wangler, get yourself a consultant and a lawyer to work over your options and your approach. With their help, contact those who referred her to you and find out if they are aware of complaints she hasn't raised with you.

Schedule more face-to-face and on-location with her to help her use what you delivered, and maybe customize it for her. And, in the process, you can demonstrate the value of what you have delivered.

And collect information in case you have to sue -- do keep your eyes and ears open, but don't take the antagonistic or inquisitional approach. Leave that to the lawyer if and only if it's necessary.

Sure, it eats into your profit to hire a lawyer and a consultant, but you're making decent money. You should be able to plow some of that back into your future profitability.

  • To give you a better sense of the value perception problem; I'm a real estate agent. The better skilled I am at evaluating a propertie's value, and convincing the seller to set the asking price close to that, the better the chances the property will sell, in a reasonable or short amount of time. The more skilled I am at designing an effective marketing campaign, the faster the property is going to sell. I don't charge by the hour worked, but for the result of my work. When things go really well, I get the result, without having to work many hours. Some people have a hard time accepting that. – snowfrogdev Jul 11 '17 at 12:35
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    Well, this is kind of what I'm talking about. Even if things go well and quickly in a sale, an extra hour or two, maybe helping your client get comfortable with turning the property over to the buyer (as an example) can make quite a difference in the ultimate perceived satisfaction. Depending on how you approach it, customers will appreciate it and be less likely to start second-guessing the fees. This kind of thing can be done in a way that makes problems worse, of course. That's why you want a third person or two to talk about it with. – Joel Rees Jul 13 '17 at 0:18
  • @neoflash You should have included your industry in the question; it is likely to effect people's answers. – user45623 Jul 19 '17 at 21:48
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You're in a tough situation because you are in an industry where it is difficult to justify major price differences to the customer.

For example, if you were a freelance carpenter, you could justify your higher prices by saying that your work uses better materials, is constructed to a higher standard, and will last longer.

However, when you're selling property for someone else, it's a bit harder to illustrate value to the client. I think in many circumstances the seller is more concerned with profit than with speed, particularly when you're selling something as valuable as real estate. Unless the seller needs the cash urgently to pay off some emergency expense or to buy another property in cash, most people are going to want to wait for the best offer to come along.

You haven't provided a lot of information about the circumstances you're in, but my impression from your comments is that you sold someone's real estate very quickly, which caused them to question your value. I think this is understandable; if the property sells very quickly, it will tend to make the seller think that the price was set too low or that the real estate agent didn't put much effort into the sale. Look at the flip-side: a typical buyer is not going to purchase the property immediately unless the price is so absurdly low that it would be stupid to wait and compare it to other options.

You wrote:

The more skilled I am at designing an effective marketing campaign, the faster the property is going to sell. I don't charge by the hour worked, but for the result of my work. When things go really well, I get the result, without having to work many hours. Some people have a hard time accepting that.

That makes it sound like your only concern is selling the property quickly (do you charge a flat rate, or a commission?). Here's the golden question: did the client specifically direct you to sell as quickly as possible/to prioritize speed over profit?

If they asked you to sell as quickly as possible, and that's what you did, then you did your job correctly and they don't have any room to negotiate a new rate for the work. Explain that another agent might have taken longer to sell the property, or else would have had to sell at a lower price to match your speed.

If they didn't specifically ask you to sell as quickly as possible, and you sold the property as fast as you could or with minimal effort, then it's arguable that you didn't do your due diligence in getting them the full market value of the property. Even if you couldn't realistically have sold the property for more than you did, the client might think you could have and there's no way to prove otherwise. If you didn't learn and follow the client's priorities in selling the property, then I would say that you made the mistake and you should agree to charge them a lower rate.

  • That is why I didn't want to specify the industry. I didn't want people's answers to be biased by what they THINK they know about how it works. A skilled agent will set an asking price that reflects the fair value of the property. When a property is on the market at an asking price that is close to fair market value, it always sells relatively fast, at a fair price for the buyer and the seller. So, in the vast majority of cases fair price and fast sale are not mutually exclusive, quite the opposite. – snowfrogdev Jul 19 '17 at 23:28
  • "Did the client specifically direct you to sell as quickly as possible/to prioritize speed over profit?" No he didn't, but I also didn't force him to accept the offer that was presented. If he felt the price was low and that it was too fast and that if he waited some more he could get a higher price he could have refused the offer. I certainly didn't force his hand. – snowfrogdev Jul 19 '17 at 23:30
  • Remember that most of your technical insight into the industry is totally meaningless to a typical customer. Your seller might not care what the "fair market value" is if they think they can get more for the property or disagree that the market value is "fair". Looking at it another way - a property that sells fast at market value is going to sell even faster under market value. – user45623 Jul 20 '17 at 1:35
  • If you can give the client a meaningful explanation of why you performed the service better than someone else, then do that. If you can't say with confidence that you sold the property faster or for a higher price than one of your competitors would have done for a lower fee, then you'll have a hard time convincing them to be satisfied. – user45623 Jul 20 '17 at 1:38
  • That's the problem. I can say it with confidence. But it still remains intangible. We'll never know for sure. All I can do is show my track record and how it compares to my competitor. – snowfrogdev Jul 20 '17 at 2:09

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