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The ‘Lucky Buyer’ Principle
A farmer needed help counting all of his sheep, so he brought in a consultant. The consultant took her fee, had a quick look around the farm, and immediately told the farmer that he had precisely 1,007.5 sheep. The farmer, astonished, asked her how she knew this. “Well, in this field right here there are seven sheep, and one of them is heavily pregnant, so that’s 7.5. And then there’s about a thousand in the fields over there.”
Any consultant worth their salt will have heard a fair number of jokes like this one, often from clients they are in the middle of selling to. In many client organisations, the prevailing attitude towards consultants could charitably be described as healthy scepticism or—less charitably—outright cynicism. Consultants, in the public imagination, are snake oil salespeople who charge exorbitant prices only to tell you what you already knew.
In our recently published report—The Future of Pricing—we attempted to quantify the depth of this scepticism by surveying buyers of consulting services—all of them holding “head of department” or more senior positions—and asking them whether they agreed or disagreed with the statement: “Consultants generally charge too much given the value they add.” The results were stark: 74% of clients agreed with the claim, compared to only 13% who disagreed.
Why, then, is the consulting market not in a state of perpetual crisis? If 74% of consumers decided that owning a T V wasn’t worth it, Sony and Samsung stock would be in freefall. And yet people keep buying consulting services: The global consulting market grew by a healthy 8.1% in 2018, and our recent Forecasts for 2019 report found that clients are broadly bullish when you ask them about how their total project spend will change in the next 18 months.
Here we have the paradox of the consulting industry: If clients are so sceptical that consultants represent value for money, why do they keep doing business with them?
The answer to this question becomes apparent when you look below the headline statistics and start to quiz clients on their perceptions of specific firms. In our annual Client Perception Study, we ask participants to evaluate the price points of firms they have worked with or have considered working with; even the worst-performing firms have client satisfaction rates (i.e., clients saying the firms’ prices are “good” or “very good”) that hover around 50%.
This is the “lucky buyer” principle at work: Each client thinks that consultants, in aggregate, are not worth the fees they charge. But they also think that they have managed to beat the market; that they have gotten lucky and have managed to find consultants to work with who do add enough value to justify their cost.
In some ways, the situation is similar to that of US politics; voters tell pollsters that they think Congress is corrupt, inefficient, and out of touch, and yet they consistently re-elect the same representatives. Partly, this is because it is simply easier to dislike a faceless entity than it is to think poorly of a specific individual. But there is also an element of self-justification going on here: “My representative can’t be a crook,” the voter thinks, “because I voted for them, and only an idiot would vote for a crook.”
So it goes in consulting. As sceptical as clients might be of consultants, they will always feel more warmly towards their consultants. Jokes like the above are, ultimately, more a sign of endearment than of hostility. Recognising that is one thing. But what effect should that have on how you, as a consultant, position your services and justify your prices to clients?