Ask the negotiator how to negotiate more profitable deals
By our News Team | 2021
How do you, as an agency, negotiate with a client that thinks you’re nothing more than a commoditised service provider?
Mike Lander, Chief Executive of negotiation skills training company Piscari and an ex-procurement director, has spent his career honing his negotiation skills when it comes to how to negotiate more profitable deals – especially with procurement.
Here he adapts those skills to the marketing agency environment.
Calling something a commodity makes us all think of a race-to-the-bottom on pricing. It doesn’t have to be that way. Your job, Lander says, is to explain to the client – using data and insights – why it isn’t a commodity service.
“I was talking to a client last week and they said to me: ‘We’ve got a significant problem negotiating a deal with one of our new clients; they’re treating us like a commodity supplier and discounting our price massively. Any suggestions?’”
Tips on how to avoid the commodity trap
Image by Shutterbug75 from Pixabay
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
- 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