Thursday, October 8, 2009

How much is your product or service really worth?

Post 342 - I read that there's a taxi driver in Essex, Vermont who'll take fares anywhere they want to go in and around Essex - for whatever they want to pay! Since his payment policy is so flexible, Hagen (that's the taxi driver's name) has taken some strange trades: one customer gave him a $10 grocery card, and a local musician gave him his group’s CD. But since he started doing this, Hagen says he hasn’t been short-changed once. “I believed from the start that this would work,” he said. “I believed that people are going to be generous enough to make it worth my while, and I’m going to be generous enough to let them decide.” So it seems that when you match pay-what-you-will with a face-to-face, conscience-inducing contact, it’s not a very risky proposition. How would this work in larger settings?

Well, there's a law firm in Chicago called Valorem Law Group that uses “Value Line Adjustments” in its pricing. The company says:
On each bill, you have the right to make any adjustment to our proposed fee that you feel is needed. We provide value or you adjust the bill, it’s that simple. We do this to give you the ultimate check on our unwavering commitment to client service, and to eliminate the concern that our level of service will wane once the work we’ve performed exceeds a given flat rate or capped fee allotment. Some have said that the Value Adjustment Line is extremely risky. We agree. If we aren’t willing to risk our own fees on our service, do you really want us advocating for you?

Valorem's alternative fee arrangements, with flat rates, hold-back buckets, contingency or even premiums on achieving certain milestones, give the firm an economic interest in achieving the results that clients desire, so its lawyers have every incentive to collaborate on every matter.

Patrick Lamb, one of the firm's founders, believes there are two over-arching truths about customer service that are worth thinking about every day you're in business:

1. You need to know what your client thinks about you. In detail. Not asking, assuming you know, drawing inferences - those approaches are for losers. Ask. Ask aggressively, that means framing your questions in ways that are designed to elicit criticism. Never lose sight of the truth that no one is perfect. Because that's so, every client should have criticisms which you should view as suggestions on how you can improve performance or the delivery of value.

2. The second truth is that if you hear the word "fine" (as in, "everything is fine"), understand that you've just been sentenced to death. If you doubt this, remember it the next time you're out at a restaurant having a mediocre or worse meal, and your waiter asks how everything is, and you answer with "everything is fine." You need clients who are more than satisfied, more than pleased. You need clients who are advocates, who think you're so great that they want to have legal problems just so they can deal with you.

What would your customers pay for your product or service if you asked them to pay only what they thought it was worth? I know AT&T would get very little money from me until they come through with the $50 refund they promised me when I signed up for their internet service back in March. It seems their every effort since then has been to make it as difficult as possible to contact them and to otherwise styme my efforts to get a satisfactory resolution of this issue.

Also ask yourself how loyal are your customers? How much do you know about what they really think about you? Ron Baker of the Verasage Institute notes that loyalty isn't dead in the business world. What's dead is a reason to be loyal. He notes that to earn customer loyalty, you have to invest in the relationship with your customers, not just satisfy their existing needs. You must move your firm from the Passive (satisfaction-based) to the Interactive (commitment-based) side of the Customer Relationship Scale and develop a long-term partnership with your customers. That's how Disney creates "Moments of Magic" and superior financial results.

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