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Use It or Lose It - The Value of Incumbency

Keith Stacey
Use It Or Lose It The Value Of Incumbency

The day started well on a glassy sea and enough fish biting to guarantee a meal or two. Then I noticed the oil slick behind the boat. Unusual for a modern four stroke and the first time I’d seen anything like it. I thought it could have been some excess fuel from an overflow. I returned to shore and after parking the boat, examined the motor. Oil was running everywhere, dripping off the motor onto the road. So much in fact, that I put a bucket under it and started to worry about environment officers appearing.


A phone call to my service centre and the possible diagnosis was that a mechanic had not replaced the oil cap at the last service. I removed the cowling and there it was, laying in the space at the bottom of the engine. Without the cap, oil had sprayed out every time the motor ran. Fortunately, I had not been out for long, but the motor cowling and leg were dripping with oil - on the outside of the motor rather than inside.


The point of this tale is the reaction of the service manager.


“Don’t want to ruin your holiday: we’ll send a mechanic up tomorrow and he’ll clean the motor, refill with oil and run to check. Don’t you worry we’ll fix it.”


I should point out that the mechanic had a drive of 450 kilometers round trip and two hours of work. A whole day, effectively to fix my problem. I didn’t have to ask or complain - they just stepped up. They now have a customer for life because in my moment of need they did what was necessary to not only restore but improve their relationship with me.


Now incumbency is a clumsy word and it’s not often used in general conversation, but if your business has a customer or client, then you are the incumbent. You have a number of key advantages that you need to be aware of, and you can use them when appropriate.


These are:


  • That when a customer has a complaint, there is an opportunity to build a personal relationship with key staff and;


  • When the business is under threat from competitors, you have an internal support base.


Research indicates that customers place a significant premium on having their complaints about products or services addressed to their satisfaction. They are subsequently more loyal than customers who were initially satisfied with the product or service. The ancient metric that it cost seven times more to gain a new customer than retain an existing customer still holds true. If your customer has a genuine complaint, we would also strongly advise you to tailor your response to what the customer needs to restore the relationship by asking them what they require.


Building trusted relationships at the personal level will also strengthen the business. The late David Maister wrote extensively about building trust. One of the key elements of the trust equation is liking. People prefer to deal with people they like - people they can connect with on a personal level. Which highlights the value of small talk that often precedes many meetings and interactions. While it drives some people to distraction, (who just wants to talk business?) it should be seen as an essential building block for a relationship.



A common ploy to improve a deal is to threaten to “test the market.”  In professional services this has been used to gain discounts of up to twenty percent from the incumbent. Any decision to switch major advisers involves switching costs and the risk associated with any change. Experienced consultants working in this area believe that the value of the close personal ties that can be developed, are worth up to twenty percent of the “value” of the deal and discounting to retain the business ignores this value.


So, if you are the incumbent, understand the advantages and opportunities and use them before you ‘lose them.’


Happy negotiating!

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