Management / Web Exclusive Features

Ask Steve: What’s the Best Way to Deal with Client “Referral Blackmail?”

Above all else, when you substantially raise your pricing, communication beforehand is the key

August 15, 2013

man women shaking handsSteve,

We recently had a window cleaning appointment scheduled with a client I’ve had for five or six years. I’ve always cleaned her windows yearly at a fairly low $150. (Which was basically my minimum price back then.)

However, I switched to package pricing in January and I really have not had much price resistance from my clients. In fact we’ve had so little resistance we now just give them the price before we start the job.

So my tech gets to this client’s home and gives her a new quote. And with my new pricing, this lady’s price goes up to $240 for our premium package. She didn’t seem upset, but just calmly told my tech that it was more than she could afford and sent him back to the shop.

But then an hour later she calls my secretary and says that if we don’t come to her house today and clean her windows at the old price, she would call everybody she ever referred (only two people over the years) and tell them not to do business with us.

She also threatened to post her bad experience with my company on Google, Yelp and Angie’s List, plus diss me on her Facebook page. Wow! Steve, I hate being blackmailed by a customer!

I grasp the lifetime value of a client that you preach. And I do understand her being upset about our price increase. But her threatening me really made me mad. In fact, I told her over the phone that I will never work for her again, and yes, I’m still kind of bitter. Plus here is the funny thing…

I have a referral rewards program which includes an end of the year drawing. Also, when someone refers me, I send them a thank you card and a $20 gift certificate to use towards their next cleaning.

So guess what? This lady sent me exactly one referral last year and she was lucky enough to be drawn -she won $200 dollars cash from me just four months ago!

Was I wrong for letting her go?

-Questioning in Ohio

 

Wow, Questioning, that is quite a story!  And I do understand your frustration. But now let's look at it through the customer's eyes. For the last five years or so, you have cleaned her windows for the same $150. (She probably did not even know it was your minimum price.)

Now, all of a sudden your tech shows up and without notice hits her with a 60% price increase! I'm sure raising your price was justified, but remember we are looking at it through your customer’s eyes. And while I don't know your tech, chances are he did not finesse it like you would have if you had been there in person.

So what would I have done differently? Above all else, when you substantially raise your pricing, communication beforehand is the key. Once the tech is in your customer’s home, it is too late. In the mind of your customer (and taking into account you had cleaned it for years at one price and especially given the fact you did not pre-warn her!) you had an "implied contract" to more or less stay at the same price.

Remember, Questioning, I am not defending your client’s "referral blackmail." I am explaining why she felt a little betrayed. (And my guess is more of your clients have felt this way but just haven't mentioned it!)

So if you want to avoid this ugly scene again, just start pre-quoting the price to your customers on the phone just to "review." (I would not even mention you have increased prices, as most will not even notice the raise.)

NOTE: For my free Special Report on how to win over difficult, price haggling customers, write me at stoburen@StrategiesForSuccess.comand put the words “price haggler” in the subject line.

Please let me know how my new pre-emptive communication approach works.

P.S. And Questioning, to answer your original question, “Was I wrong for letting her go?” I would simply reply, “Yes!” Why? Because I think your customer has a valid point. I would have apologized for the misunderstanding during the initial confrontation and hopefully kept things from escalating! Here is how to do this in any situation:

1. Always instruct your tech to call you immediately when things start to get ugly.

2. Talk personally over the phone with the customer before the tech leaves. In this case, if she would not listen to reason I would have yielded, admitted my "blame" for not having pre-informed her of the increase and ,on a one-time basis, said, "You know, Mrs. Jones, because you have just been a peach of a customer we will maintain our old pricing for you this year."

3. A saying we use a lot in SFS, Questioning, is "Always run your business based on the emotions of the customer but never make business decisions emotionally." You will always regret impulsive business decisions.

4. In fact, I might very well reach out to her even now and explain you had been thinking about how things went down between you. Then apologize and offer a free window cleaning to make up for your “mistake.” But either way, don't fret it. Learn from it and move on.

5. And finally, congratulations on raising your prices. More cleaners should do so. Most customers honestly will not mind ... if you communicate it properly beforehand!


 Steve and ICS want to consult for you! For a personal reply write Steve HERE with your questions, problems, struggles and challenges!  Your help is on the way! Look for a new “Ask Steve” every Thursday in the ICS eNewsletter. Register to receive it by clicking here

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