Grandfather Clause: 3 reasons to use it to implement client changes

My business was growing fast, but I had made a terrible mistake. I had previously created a new discount class for pallet orders (15% off) to please some new larger clients who were asking for a better price. Excited to get these larger clients, I thought giving them that high of a discount made sense. Two years in, it was clear that our margin was way to low to serve them well. That decision haunted me. I did not want to lose the clients but the thought of getting more clients like this was scary. What could I do? The answer was the grandfather clause.

It was then that I remembered a strategy that worked well in my "previous life" where we were serving more than 1 million customers in a strong growth environment: the grandfather clause.  In case you are not familiar with the term, here is the wikipedia definition:

A grandfather clause (or grandfather policy) is a provision in which an old rule continues to apply to some existing situations while a new rule will apply to all future cases.
To correct my error, I opted to make a change effective the following month and to grant a grandfather clause to the few clients who were entitled to the 15% discount. Moving forward, larger clients were eligible to receive an 8% discount for our top tier volume segment. This was a great move.

Here are 3 reasons why YOU should consider applying a grandfather clause for any important change in your product or service offerings:

1. Respect your existing clients

   Your clients came on board because of a promise. You have been delivering on this promise since then and any change to that promise must be carefully considered. Pricing changes are understandable, material changes can be explained, and time delays can be justifiable, but in the end, you must veer as little as possible from the promise. A grandfather clause that is well communicated can actually enhance your promise to them. Your existing clients will appreciate that you are giving them special treatment. When we canceled the 15% pallet discount program, we communicated to the few lucky clients that they were put in a special category and were keeping their 15%. You can imagine how happy they were.

2. Protect your business model

   A grandfather clause, whereby you do not apply the change to your existing customers, will ensure the maximum retention possible. No change means business as usual, literally. Also, you protect your business model by getting future new clients with these changes baked in. This ensures your business model remains viable (or more viable) with ALL future clients. Your promise has changed and new clients jumping on board will do so with the new one, so nothing is lost on them. As we continued to pitch new clients, we realized that not having the 15% on our discount program made no difference with our growth. We had replaced it with an 8% tier on our discount scale, and prospects appreciated being able to get a bigger discount because they did not even know the 15% had existed in the past.

3. Dilute the risk

   By moving forward and implementing that important change, you improve your business model. Either a better bottom line, like in our case, or maybe less pressure in the system (promise deliver delays (aka SLA) anyone?) or whatever that change was motivated by. You still keep your existing clients happy, but dilute the cost of not changing their servicing with the gains you will make with newer ones. Our average discount given was around 11% across the board. A year after the change, we had reduced that 6%, despite having a grandfather clause in place.

A few years down the road, I realized the grandfather clause was actually the perfect compromise. We fear making any change because we don't want to upset and lose our loyal customers, yet we understand that conditions change which is putting our business at risk. Respecting your existing clients, protecting your business model and diluting the risk of a change are 3 reasons that a grandfather clause is perfect when one feels stuck in the face of change.

Is there a change in your small business that you are procrastinating on? How could a grandfather clause help you proceed with that change with confidence?

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