How Boutique Consultancies Get Relationship-Building Wrong

Yesterday I shared a true story of a consulting firm that agreed to lose money delivering an engagement to win a client. While in that case the argument presented was to look at social proof (the logo in the portfolio) as a marketing investment, a consultant asked me this: "Couldn't you justify this as an investment in the relationship?"

This sounds reasonable when you say it, but I'll tell you why this idea doesn't make any sense.

Everybody and their mother knows that consultants are in the relationship business. Who you know matters more, or at least as much as, what you know. People are much more likely to hire those who they know and trust.

But what does "investing in the relationship" really mean? Here are some helpful definitions everyone would agree with (from the dictionary):

• Investing: the act of allocating money, time, or energy to a particular undertaking with the expectation of a positive benefit or return in the future.
• Relationship: the way in which two or more people are connected, the way in which two or more people regard and behave towards each other.

Using these definitions, delivering a product or service without asking for payment qualifies as an investment in the relationship only if:

• It benefits (or will benefit) the connection between you and the prospect.
• It benefits (or will benefit) the way the prospect looks at you.
• It benefits (or will benefit) the way the prospect behaves towards you.

The way I see it, none of these conditions are satisfied. Charging less (or not charging) for the value you deliver will actually hurt the relationship. If you don't value your expertise, neither will your prospects. When you don't create scarcity for your advice, clients will look at you as a commodity instead of an authority.

Saying this is "investing in the relationship" is playing semantics. This is not investing, but discounting.

When you choose to deliver an extra service without charging for it, you are effectively increasing both your scope of work and the client's expectations. This "extra" you delivered is built into your price whether you like it or not.

Now, if this "extra" is creating any value for your client (better results, higher level of support, or whatever that may be), it is also worth paying for. What you need to do is simply communicate that extra value to the client, not give it for free.

Delivering work that you would normally charge for at no cost has one name: discounting. It lowers the perception of value and sets a precedent that this will be built into your existing price.