SkillsSkill 5 of 5
Price the relationship, not just the product
Price what the whole relationship earns and would lose, and never trade credit structure for rate.
Worked example
The pricing model says don’t match. Do you?
A model that sees one product can be precise and still answer the wrong question.
The question
Fernmoor Bank, a fictional regional bank, is renewing a $3m term loan for Brennick Dental Partners, an invented group practice. The credit is sound: coverage is 1.6 times and every covenant is met.
| Today | If we match | If they leave | |
|---|---|---|---|
| $3m term loan | 30 | 6 | 0 |
| Operating deposits | 60 | 60 | 0 |
| Treasury management fees | 25 | 25 | 0 |
| Business cards | 9 | 9 | 0 |
| Relationship total | 124 | 100 | 0 |
Invented data. Matching cuts the loan rate by 0.80 points: 0.80% of $3,000k is $24k a year.
At the matched rate this loan earns $6k a year, below the $24k minimum for a loan of this size and risk. Recommendation: decline the match.
- Practice ownerAnother bank will refinance at 0.80 points lower. If you won’t match, we’ll move the loan and our operating accounts.
- Practice ownerThey’ve also offered to drop the coverage covenant.
“The loan pricing model says the matched rate earns too little. Do you match, and on what terms?”
Your turn
Say your answer out loud, or jot notes below. Both work. Or skip to the worked answer.
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A strong answer, step by step
Open each step in turn. This is one strong answer, not the only one.
Step 1: Price the relationship
What would you do here? Open the move you’d make.
Decline the match: the loan earns $6k at the matched rate against a $24k minimum.
Tempting, but it misses something. That answers a one-product question. The relationship earns $124k today and $100k if we match; losing it costs $124k.
Match, and add a fee waiver to make sure they stay.
Tempting, but it misses something. Matching already costs $24k a year. Nothing in the notes says the client wants more than the rate.
Add up the relationship: $124k today, $100k if we match, nothing if they leave. Matching costs $24k; losing them costs $124k.
The strong move. The pricing model saw only the loan’s $6k. The decision is about the whole client.
See how a strong candidate says it
“On its own, the loan at the matched rate earns $6k, under the $24k minimum. But the relationship earns $124k today and $100k if we match. Matching costs $24k a year; losing the client costs $124k.”
Why it works: The model answered a narrower question than the one being decided.
Step 2: Test the threat and the deposits
What would you do here? Open the move you’d make.
Check how stable the operating balances are, whether they depend on today’s rates, and whether they’d really move with the loan.
The strong move. $60k of the $100k comes from deposits. If they’d leave anyway, the case for matching shrinks toward the loan alone.
Take the owner at their word: the accounts will move.
Tempting, but it misses something. Maybe, but $60k of profit rests on that claim. A look at balance history costs nothing.
Assume it’s a bluff; switching banks is a hassle for a dental group.
Tempting, but it misses something. Guessing either way puts $124k a year at risk, and the other bank has made a firm offer.
See how a strong candidate says it
“Before relying on the $60k, I’d check how stable the operating balances have been, whether they depend on today’s rates, and whether the accounts would really move with the loan.”
Why it works: Relationship value only counts if it is real and would actually leave.
Step 3: Match the price, not the structure
What would you do here? Open the move you’d make.
Match the rate and drop the coverage covenant too, as the other bank offered.
Tempting, but it misses something. Coverage is 1.6 times and every covenant is met today. Dropping the covenant gives away the bank’s early warning to win on price.
Match the rate on unchanged terms and keep the coverage covenant.
The strong move. Credit structure isn’t a pricing lever. The relationship case justifies $24k a year, not more risk.
Meet them partway: cut 0.20 points, which keeps the loan at the $24k minimum.
Tempting, but it misses something. It satisfies the model and probably loses the client: 0.20 points saves them $6k a year against a 0.80-point offer.
See how a strong candidate says it
“I’d match the rate on unchanged terms. I wouldn’t drop the coverage covenant to win the deal. Credit structure isn’t a pricing lever.”
Why it works: It keeps the relationship argument from becoming a reason to take more risk.
Step 4: Make it an approved exception
What would you do here? Open the move you’d make.
Agree the match on the spot to show the client you can move fast.
Tempting, but it misses something. An exception that skips approval leaves no record of why $24k a year was given up, or when to look again.
Match now and quietly raise the rate at the next renewal.
Tempting, but it misses something. Quiet repricing breaks the trust the match was meant to keep. Review the relationship openly instead.
Document the relationship case so the right person approves the exception, and review it at the next renewal.
The strong move. An exception with a record and a review date is a decision, not a favor.
See how a strong candidate says it
“I’d document the relationship case so the pricing exception is approved by the right person and reviewed at the next renewal, when we can see whether the relationship held.”
Why it works: An exception with a record and a review date is a decision, not a favor.
The answer, in short
- Decision
- Match the rate on unchanged terms as an approved pricing exception, and keep the coverage covenant.
- Because
- Matching costs $24k a year against $124k of relationship profit at risk. The loan model sees only the $6k.
- What would change it
- If the deposits are rate-sensitive balances likely to leave anyway, or the practice’s credit weakens, the case falls back toward the loan alone.
A real interviewer may ask: “Tell me about a time you kept or lost a client over price.” Use your own experience: what you weighed, what you decided and what happened. Don’t memorise an invented story.
Common traps
- Letting a one-product model decide a relationship question.
- Counting deposits that would not really leave.
- Loosening credit terms to win on price.
- Making an exception with no record or review.
Check your answer
- Did I add up what the whole relationship earns?
- Did I test whether that value is real and at risk?
- Did I keep credit structure out of the price negotiation?
- Did I make the exception reviewable?
Want feedback on how you’d answer? Practice “Price the relationship, not just the product” with an AI interviewer on Socratify.
Last reviewed Nov 9, 2026