Subjective Consulting Valuation and Profit Decoupling Paradox
Evaluators often rely on client satisfaction and stated willingness to pay to gauge the value of business advisory services, assuming subjective valuation reflects objective financial returns.
Picture this
Imagine a student hiring a private tutor who is very friendly and supportive. Even if the student's test scores do not improve at all, the student rates the tutor highly and says they would pay to keep meeting them out of personal affection or the hope that the tutor might give them free study materials later. In microenterprises, business owners report high satisfaction and willingness to pay for elite consultants due to personal rapport or expectations of future cash grants, even when the advice fails to increase firm profits.
What the evidence says
Tailors reported a willingness to pay of 5.9 cedis (US $4) per hour to continue with Ernst & Young consultants, significantly higher than 2.8 cedis per hour for other consultants (p < 0.01) and 4.2 cedis per hour for alternate training (p < 0.05), despite consulting producing zero average income gains (0.905 cedi increase, p > 0.10) and an initial 26 cedi profit drop in Round 3 (p < 0.05).
- Who
- 160 urban microenterprise tailors in Accra, Ghana.
- How
- Randomized controlled trial measuring post-consulting willingness to pay (WTP) per hour across different advisor types (Ernst & Young consultants vs. generic trainers) compared against objective financial profits.
What to do
Separate program evaluations from client satisfaction metrics by relying strictly on audited objective performance indicators rather than stated willingness to pay.
From the source
"Given the results we have previewed, this willingness to pay is a puzzle, and we posit two possibilities: perhaps respondents felt loyalty to their consultant on a personal level... or, perhaps respondents felt that if they report satisfaction, they would have a chance of receiving some free future services..."
Consulting and Capital Experiments with Microenterprise Tailors in Ghana