Loyalty and discounted fees

advertise-768070_1920An article in the WSJ about retail stores closing on Black Friday included an interesting quote from former Staples executive Mike Edwards:

“…Deeply discounted items also attract a “nonloyal deal-seeker” who would be unlikely to help improve the store’s performance in the long-run, he added.

The idea that customers pay a premium and also remain loyal is fascinating. People value products and services that they have to purchase.

It is tempting to drop prices and hope to make up the balance of volume, but it trains the consumer to look for discounts and always seek out the lowest price. Once they are on the hunt for the lowest price, loyalty goes out the window and margins are eroded to nothing.

Any examples of situations where dropping the price has actually led to less client loyalty?

A pile of documents

docMy partner’s desk as he prepares to dive into a client’s original lease and four (FOUR!) amendments. Nobody had spent the time previously to provide the tenant with a simple overview of the business terms. Previously, the client had to perform a forensic analysis every time there was a question about the lease or a charge from the landlord.

Providing an analysis like this serves two functions:

It gives the client an easy reference book outlining the terms, options, and exposure that exist for the tenant.

We are also able to demonstrate our work product so the client understands exactly how we’ll help them once we’re engaged.

Success and a singular focus

I’m reading a biography of Warren Buffett and there are two things that jump out at me about Buffett, aside from his prodigious intellect, of course.

One is how hard he works at cultivating relationships. He actively identifies people he wants to befriend and then works hard to bring them into his orbit. There are frequent references in the book to his phone conversations and travel to connect with friends and business associates.

The other is his singular focus on accomplishing his goal, which is making money. Everything he does, every action he takes, is with the purpose of achieving his goals. He does the boring, tedious stuff, and doesn’t get caught up with all the glitz, glamour, or distractions that come along.

This is true of all business, whether it’s running a Fortune 500 business or building a career in the art world (just ask my brother.) Its all about an obsessive focus on your goals combined with deep personal relationships.