As a small biz owner, I’m always on the lookout for new services that help me run my business, inexpensively.  I’m lucky in that the last ten years have yielded a bonanza for the consumer of long distance phone service, personal computers, and internet service—all things necessary to set up shop in a home office. Two years ago, I signed up for a service that automatically backs up my computer files on a regular basis.  The service, based on the East Coast, is a small biz itself—I’m not sure if it’s more than the owner and a couple of employees.

If you’ve ever used a back up service, it’s a lot like insurance. You don’t need them or hear from them unless you have a crisis or unless it’s time to renew the policy. I’ve only had one time when I couldn’t get to my files and needed to access the backup. The service was good enough but nothing remarkable. The only other interaction was in asking about a rate increase for the yearly fee, based on the size of files being backed up.

This month, I switched to another backup service, costing a third of my former service, with unlimited size of files to be backed up. 

When I informed the owner of the old service that I would not be renewing for another year, here was his response:

“I’m sorry to see you go. We are releasing a new software version and lower pricing in the next week. If you have found better pricing elsewhere that we can match, I’d love to do what I can to keep you on board. Please let me know.”

To which I replied:

“Thanks for your note. Unfortunately, I’ve already signed up with XYZ company at $54 per year with unlimited space.  The difference was so large that I couldn’t resist trying out a new service.” 

His response?

“XYZ company has come on our radar recently and to my chagrin we will begin matching their ridiculous cutthroat pricing!” 

What I learned from this exchange:

• The time to retain your customers is not when they’ve announced they are leaving. It’s when they are still happy to be with you. I give the owner of this small biz credit in trying to keep me with a promise of lower prices and new software–but this rings hollow when the last time I heard from him was a year ago, after asking about an increase in my annual fee.

• One of the guidelines in selling is to tell your customers about the benefits of your product and not about the functions. I don’t really care about new software without an explanation of how it benefits me. My own reaction is a good reminder for me of this truism.

• Another truism:  Know your competition. XYZ company was one of four backup services profiled in the Wall Street Journal six months ago. I waited until my annual contract ran out before switching services–plenty of time for this small biz owner to find out about the competition and offer me a deal on my renewal.

• Unless you are distinct in the marketplace, there’s always the risk of becoming a commodity, where the customer shops strictly on price.  This is what happened when I switched services.  There was nothing to compel me to stay with my old service that the new service couldn’t offer me. My old backup service was provided by a faceless company, without a brand.

The big lesson for me is that it’s all about relationship. I had no relationship with my old service provider, save for an invoice emailed to me once a year and an unremarkable interaction when I needed to access my files.

One might argue that it’s hard to create a relationship in an IT-like business.  It’s not true. I’ve used another company to fix and maintain my laptop for the last few years.  Every few months, I get a post card from them in the mail for specials on servicing.  Recently, I received their customer newsletter with information on defragmenting my disk when my computer is running slow and keeping my PC safe from spyware.  These are tips I can use, even when I don’t need a service call. I feel like I have a relationship with this company.

I have other relationships with service providers that are even stronger, where I know the owner of the company on a personal basis. This isn’t always possible to do with customers. When you can, promises of lower pricing or more functionality pale in comparison to the loyalty that’s created. As a customer, I want partners in solving my problems. I’m likely to cut a company some slack (e.g., delayed servicing, billing mistakes, higher costs) if I feel it’s a true partnership.

I’ll be curious to see if my old backup service is in business a year from now.