Platt’s Perspective: Client Retention, A Cautionary Tale

As one of the top issues facings firms today, client retention is critical to the success of any business. A few weeks ago I was having a beer with a neighbor who sits on the board of a non-profit association. He shared with me the story of how his board abruptly fired its association management company, terminating a contract worth close to $500,000 for the association management firm.

What’s shocking is that the association management company thought everything was working well. The management company was surprised, angry and confused by the board’s action. From the board’s perspective, all the signs were there. They were frustrated by fees, felt increasingly neglected, and ultimately thought they were being taken advantage of.

The association management company invested a lot of time and money to provide the service they were contracted to provide, but failed to continue to point out to the client the value they delivered.

The association management company failed to convince the client that the opportunity cost of leaving was higher than the fees it was being paid. While it continued to provide the contracted services, that enthusiastic “We’ll go the extra mile!” attitude that every client relationship (and any personal relationship, for that matter) experiences in the beginning, started to wane, and pretty soon the feeling that “We’re all in this together” started to shift towards preservation of limited resources. Before long, the ubiquitous “What Have You Done For Me Lately” syndrome set in. In the end, the contract was legally terminated, and a secure future for the management firm was in jeopardy.

Do you have clients who could behave like this? How can you avoid something similar happening to you? I know that the vast majority of you, could comfortably and convincingly demonstrate your worth if you had the chance to sit down with your clients face-to-face. But what if that opportunity never arose? What if the client thinks he/she sent multiple signals to you through other actions (or non-actions) and then made a unilateral decision because you didn’t respond appropriately? What then?

All of us would like to believe if a client is unhappy, he/she will pick up the phone and call us in or somehow let us know. That may be true for some, but certainly not all of your clients. Personalities of the board or the CEO of client organizations have a lot to do with how they operate, and clients like this (which some would call passive-aggressive) will blindside you if you are not paying attention.

Your clients have many ways to show you that things aren’t going perfectly – and you need to be alert to those signals, even if they are not terribly obvious.

If you conduct client satisfaction surveys, and your firm scores a four out of five, there is a potential problem… there is something that you are doing (or not doing) that prohibits the client from giving you the highest marks possible.
If you bill a client and they take months to pay, there is a potential problem. Sure, they may be in a cash flow pinch, but if they don’t communicate with you that they will be paying late, chances are there is something more behind their withholding of funds.
If your client talks to you less frequently about their business, there is a potential problem. Perhaps they have lost confidence in you as their key adviser or have found someone else to share their concerns with.
If you are not helping your client deal with the present or plan for the future, there is a potential problem. Do they see you only as the service provider to “clean up” after they have, without your input, already made major decisions? Or do they consider you an integral part of their future, not just a commodity service provider?
If they are not referring your firm to their friends and peers, there is a potential problem. If you are good – at being their adviser, there should be no hesitation for them to shout it from the rooftops and boast about what you do for them. If they are not singing your praises, it may be because they lack confidence in your abilities and don’t want to risk their reputation by introducing you into a relationship with their peers.

Often, clients feel awkward bringing up issues with their service providers. For some, walking across hot coals is preferable to confronting their service professionals. The insurance industry has identified this reality of client discomfort. Last week I saw a television advertisement for a nationally known brand that essentially states they know how awkward it is to switch insurance agencies so they will contact a prospect’s current insurance provider to facilitate the switch and make the transition go more smoothly.

Don’t let the fact that you are unaware of any problems in your client relationships lure you into thinking that everything is OK. Relationships are getting more complex, and you are obligated to evolve as the relationship deepens. Recognize when things aren’t perfect and proactively address those issues before they start festering with the client or their board. If you don’t, you may wake up one morning and be surprised, angry and confused to find out that a $500,000 client has decided to move on without you.