Con: Are you kidding? How much is this going to cost us?
Pro: Actually, the data shows that firms offering this see clients taking back around 1% of their total fees: Which is not going to kill us, in the larger scheme of things, and which we might decide is an amount worth our investing in for what we’ll learn about ‘value.’
The available data comes from businesses as diverse as industrial strapping to IT consulting, but has its center of gravity in the range of 0.0025 to 0.0175, or 0.25% to 1.75%. This hardly rises to the level of life-threatening, especially when put in the context of write-offs and write-downs. According to Dr. Christopher Hart, a former professor at Cornell and Harvard Business School, “companies notoriously overestimate payouts by a factor of 10x to 20x.”
Here’s an example from Christopher Marston, CEO of Exemplar Law, which has had such a guarantee place since its founding:
As far as payouts, Marston says “I’ve had two clients in ten years invoke our guarantee. One was a client that we shouldn’t have taken on in the first place – the fit wasn’t there. The second was a new client we were working with for the first time. We ended up issuing them a partial refund – and they stayed a client.”
Con: We can’t just leave it up to clients to say what they think; it’s in their self-interest to get a break on our fees any way they can.
Pro: A ‘guarantee’ worth its name has to be the client’s to invoke or not; if we start debating with them, we might as well not do it.
Con: If word gets out, our other clients are going to start demanding it.
Pro: Every one of our clients has their own preferred customers; it’s standard operating procedure. We can tell them it’s not available to everyone, plain and simple. But more important, what are you afraid of? Aren’t you confident our firm provides ‘value’ to clients of all kinds all the time?
Con: Why would we ever knowingly assume vulnerability and risk? Besides, who’s done this? Maybe two or three firms? I don’t think so.
Pro: In reality, making us vulnerable to clients builds trust; and we won’t offer it to greedy, opportunistic clients. As for not-alot-of-firms having done it, how better to differentiate ourselves in today’s environment of a battle for market share? Given the choice between two highly comparable RFP submissions, ours with a value guarantee and Firm X’s without, which is the client likely to prefer?
This last point is worth emphasizing because it may be the emotional (vs. the business) fulcrum around which the internal debate revolves. Proponents can say, essentially, we have nothing to fear. Our firm proudly proclaims the desideratum, and lives the reality, of providing superior client value—does it not? Detractors, seeing themselves as realists or cynics, will argue that’s not exactly true 100% of the time—and that clients know it and will exploit it. This boils down to “We’re promising something we already deliver” vs. “We’re staking a claim to an impossible aspiration.”
Second: The Dynamics
This is where the real power of offering a value guarantee may come in; it can (it certainly should) change behavior. It’s a category error of the first order to think of it as a business development and marketing tool; rather it’s a catalyst to re-examine how your firm conceives and delivers value to clients to begin with—and to begin to re-mold your internal behavior to consistently deliver what you promise or aspire to.