Any article that concludes in its very first sentence that
consulting is an industry that never goes out of style is bound to appeal to my consultant’s heart. The conclusions of Francesca Gino’s studies, as summaried in The Hidden Cost of Buying Information (Sadly lost to bit rot on the internet) over at HBS Working Knowledge, are not surprising to me: when you pay money for advice, you are more likely to use it. Our industry has built that into our fee rates, thank you for pointing it out. But there are still a few surprises in the study.
The first surprise is that the subjects in the study substantially overweighted paid-for advice over free advice even though they were told it was the same advice from the same source. These are the same people, receiving the same advice form the same advisers, one day it is free, the next they have to pay. They know this, and they still attach a higher value to the paid-for advice. This is clearly a deep emotional response that overrides anything logic may attempt to dictate.
Ms Gino is nervous about making direct conclusions:
For consultants, investment bankers, lawyers, and other professional advice givers, the implications of my results are less clear. Perhaps they could look at my results as a justification for their high fees! Seriously, the results suggest that fee structures may well influence the extent to which clients respond to the advice they give. This might be very relevant for companies that offer consulting services as an ancillary service to their core business. These companies often struggle with how to price their consulting services. Should they charge “full markets rates” or should they offer these services as a discount to potentially create demand for their core business? If there is a tendency to overweigh costly advice, it suggests that the discounting strategy may not actually be effective.
I’m less hesitant and based on too many years in this industry my conclusion is clear: if you want people to follow your advice, make it expensive. There, I’ve said it. Now you know why we cost so much: it is in you own best interest, really!
Returning to a rare moment of seriousness, it is surprising that the report’s authors do not consider one obvious, valid reason for giving a higher weight to paid-for advice: more care may very reasonably be expected to have gone into the formulation of the recommendations. If you ask me over a beer for advice I will happily give you the best suggestions I have while we are in the bar, but if you pay me the then I will arrange for a suitable environment and appropriate time to consider your query and measure my response.