You’re the Most Expensive Agency We’re Talking To
By Tim Williams
Your firm has just done its very best work preparing a recommended marketing program and the response from procurement is “This is the most expensive proposal we have ever seen.” Or “Our benchmark data shows that your pricing is 20% higher than other agencies.” The problem, of course, is that your prospective client is telling the other agencies in the review the exact same thing.
Welcome to “procurement conditioning” — a process whereby professional buyers attempt to win the contest before the game has even started. It might be shocking to hear that procurement professionals would be so brazenly misleading, but generally very little of the feedback you get about your pricing is true. Warnings like “Unless you reduce your pricing by 20%, you won’t make it through to the next round” is procurement’s attempt to extract a last-minute price concession that you don’t really need to make.
Price is never the most important factor
The ultimate prevarication is when you’re told “Price is the most important factor in our decision”. Unless you’re in the business of resizing digital banner ads, that is never true. Search consultants will tell you that price is rarely more than 20% of the decision criteria in any agency review.
Remember, the job of professional buyers is not to select the agency, but rather to attempt to negotiate the lowest price from the agency that has already been selected by the economic buyer (the CMO). This means that you — as a professional seller — need to sharpen your skills when confronted with these predictable procurement ploys. Rather than passively reacting to what you’re asked or told in a negotiation, your job is to politely disrupt your client’s flawed buying process.
To change the compensation dialogue in the right direction, your firm should have its own set of pricing principles that govern your discussions and decisions. Here are 12 that we strongly recommend:
Negotiate pricing when you have the most leverage — in other words, before any work has started.
Use anchoring. Remember that the first figure named in a negotiation silently shifts the other side’s expectations of the final price. (And beware the effects of reverse anchoring on the part of your client.)
Present and discuss outputs (deliverables), not inputs (hours or time of staff). The ultimate approach is to attach your pricing to programs or solution sets, not services.
Always present pricing options — multiple ways for your clients to say “yes.” Present your most expensive option first; this is your “anchor price.”
While the client always wants to level the playing field and compare “apples to apples,” your job is to be an orange. Do everything you can to show why you’re different.
Avoid discussions of “transparency.” Make it clear that your version of transparency is for the client to be transparent about their marketing results rather than the client having visibility into agency costs.
Maintain your pricing integrity. Never reduce your price without also reducing value.
Remember that only uncommon offerings command uncommon prices.
Use the word “price” instead of “fee.” Use the word “agreement” instead of “contract.” Use the word “fair,” as in “Is this a fair price to you?”
Place a timeline on proposals; no price should last forever.
Communicate that you intend to manage actual scope (deliverables), not hours.
After presenting your pricing, shut up.
Most importantly, negotiate something both parties want to maximize. Your clients want to minimize price, but they don’t want to minimize value.
It’s been said that the way to save the most money is to hire the most expensive agency. It stands to reason that the firms with the highest pricing usually have the strongest ability to solve problems not just quickly, but effectively.
