A Boutique Consultancy’s $100,000 Gamble: Buying Client Logos

Here's a true story I've heard from a close friend and consultant that is based in the UK. Let's call him Jim.

Jim runs a boutique consulting firm with two other partners, and they had been engaging with a global company for more than 4 months trying to win their first project there. After multiple conversations and a long negotiating process, they found out the project was awarded to another competing consulting firm.

As you should, Jim called his strongest contact in the company to understand why the company chose the competitor and what he could have done differently to win the business.

Three consulting firms were among the finalists. Jim's firm had proposed solutions that ranged from $180,000 to $280,000. One of the competitors also presented solutions in the $200,000-$300,000 range. While we don't know what was included in the scope of work, both proposals had a very similar pricing point.

The third consultancy, which won the business, had proposed a price of around $80,000. Now, that's too big of a difference to understand. This large gap usually means that there's also a big difference in the value being created - the company is compromising on the quality of the delivery, client support, or something else.

Hearing this, Jim pressed his contact to understand how the company justified choosing a price that was so much lower. The project could not be successfully delivered for that price. Now here's the story his contact told him.

He called the consulting firm to ask why their price was so much lower than the one from the competition. The partner told them that they were actually going to lose $100,000 to deliver the project, but that it was worth it since they could add the prospect's logo to their portfolio. This logo is, after all, among the most recognizable ones on the planet.

This real story is thought-provoking because there's a difference in how each consulting firm looks at the business - they are using not only different maps, but have different definitions of what the role of marketing and sales is.

Jim sees sales as a natural result of his marketing initiatives - contracts must be profitable to fund future marketing initiatives and keep the engine going. His competitor, however, transformed sales itself into a marketing initiative. Bidding that low made sense to him since he looked at this as an investment, not a loss.

There is no right or wrong, but here are some questions you might want to ask yourself:

• In your opinion, was the logo worth $100,000?
• What would happen if you tried to do the same? How do your clients perceive a very low price? What would change compared to your current engagements?
• What are other (less expensive) ways in which you can show proof of competence and reliability to your large prospects, that don't involve showing them logos of your previous clients?