Ask the negotiator how to negotiate more profitable deals

So, as agencies, what can you learn from the IT sector to counter these ‘commodity’-type discussions/negotiations?

• Map out the value chain of activities for your agency’s service. Do it end-to-end, from a customer’s perspective
• Then identify the big pain-points for your customer and the estimated costs of that pain. Don’t break down your pricing into those value chain activities!
• Start to build a total cost of ownership (TCO) model with your client by splitting all their costs into different buckets (you could present it as a waterfall diagram). This helps them build the business case to work with you. For example:
  • Associated people costs (theirs and yours)
  • Disruption/switching costs (downtime, loss of traffic, errors, relationship changes)
  • Training costs
  • Hardware/software/systems
  • Re-work costs
  • Educate your client about the supply market and associated risks with low-price providers – become the trusted adviser
  • Listen to their key criteria for supplier selection. What’s really important to them? What’s gone wrong in the past?
  • Offer to provide dashboard reporting FoC (full operational capability) for 12 months. If they want to keep it after 12 months, they pay a pre-agreed fee for a 36-month contract

Ultimately, your goal is to move the conversation away from commodity features into how you understand and solve their business problems in order to deliver outcomes/targets.

Source: Mike Lander, Chief Executive of Piscari