What price a relationship?

  • Business life is rarely without its ups and downs and there are occasions when we all have to call in the odd favour.

    Such was the case this week, when an issue arose with an advert for one of our clients. With the fault laying fairly and squarely at our door, our first response, after apologising to the client, was to arrange to run the advert again at our expense.

    Having worked with the publication in question for many years, and purchased a reasonable amount of advertising from it, we asked for some leeway on the price. The response was an uncompromising 'No. This is your problem, not ours'.

    This might seem perfectly reasonable. After all, why should the publication compromise its margins to help us out, particularly in these straitened times?

    The answer lies in the pricing strategy.

    The incident brought home to us that what we had seen as a relationship, the publication prefers to treat as a series of unrelated transactions, each to be exploited for the maximum possible price. No value is placed on our future spending power: the priority is to maximise revenue now.

    This is a legitimate pricing strategy, but not without its consequences.

    The discovery forces us to re-appraise the way that we will do business with the publication in future. The loyalty that we have felt towards it now looks misplaced and leaves us feeling a little foolish. We must now start to treat each transaction as the publication does and judge it primarily on price. We are also motivated to look more closely at the competitor publications and get to know the people behind them a little better. These are all the characteristics of a transactional relationship.

    In contrast, a small concession would have deepened our sense of loyalty, encouraged our advocacy and even left us feeling a little in the publication's debt.

    The publication has great confidence in its brand and, if it is right in its assessment that it is the No1 brand in its niche, it can indeed dictate terms in this way. For most businesses, however, applying transactional pricing in a relationship situation is a dangerous and short-termist approach. The pursuit of margins, in the absence of, or at the expense of customer loyalty, ultimately shifts economic power to the customer. Customers quickly leave when a better offer arises elsewhere.

    Sour grapes? We hope not. We accept our misjudgment of our worth and respect the publications right to act as it pleases. We are happy to work under the new rules.

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