The Ad Industry isn’t a discounted industry, thank goodness. At least not yet.
Discounting is definitely the wrong direction for the ad industry to be moving.
Professionals Negotiate. Fools Discount.
Discounting is definitely the wrong direction for the ad industry to be moving.
But if we don’t change the way we do businesses, our advertising profession will turn into a discounted profession where every client has been trained by us to expect a discount on the goods and services we provide. To change this growing trend, we should welcome opportunities to negotiate over the services we provide as well as over the prices we charge. For many of us, that means we need to brush up on our negotiating techniques.
Negotiation Rules of the Road
Rule #1: Don’t start any work for any client unless a budget for the work has been agreed to before the work starts into production. In your agency, no work for a client should start unless a budget has been set and established. If you take this simple step of setting a budget with your client before you start to work, you will eliminate most client discounting. It’s hard for a client to beg for a discount after a budget has been established and you have produced the work for the budgeted amount. Not impossible for them to beg, just very difficult.
And taking what we might call a “haircut” occasionally or a slight price adjustment every now and then with a good client on some part of the job is a normal part of any profession. But haircuts shouldn’t turn into discounts.
Many clients of course will try to request a discount when you agree to take the job because that allows them to act like a hero with their boss. You know the type, “Hey, Boss. The agency wanted to charge us $3X for that project, but I got it for $2.75X. What a hero I am.” At this stage, you should have agreed to take less money for the project in return for changing the job someway. That’s negotiation. But never agree to do the same work for less money. That’s discounting.
Stick to Your Guns
Rule #2: Learn to be firm. Stick to your guns. You want to remain in a position where you never, never, never discount solutions you have already produced. You can do that easily if you have set a price before production. And it’s not difficult to hold your prices when you had an agreement to proceed.
For most agencies this simple step of agreeing to a firm budget or estimate (within the normal plus or minus 10% range) before starting the work sounds impossible. But many agencies work this way all the time and therefore have no trouble with discounting. But those successful agencies worry all the time about those of you who don’t operate this way, and then mess it up for the rest of them by discounting what you agreed to do after you do the work.
Change the Specs
Rule #3: Negotiate over money and negotiate over specs for the job at the same time. If the client wants a discount at the estimate stage, then just change the specs. For example: “OK, we can maybe do the site for that new budget, but that means less graphics on the home page and fewer support pages with less images for your site. We can probably get it produced for that new budget number you have but I’m not too sure you will like it.” I assume you know how to change specs if the client wants to spend less money. That’s not discounting, that’s negotiation. And there’s a big difference.
Live With The Risks
Rule #4: Learn to live with the risks of losing in negotiation. That’s the only way to win. Does that mean some clients will walk if you want to change specs? Yes. Will you loose a job or two? Maybe, but you are being fair to the client and to yourself. What happens if you go to McDonald’s and don’t have enough money for a Big Mac™? The clerk behind the counter will offer you a regular hamburger, or something else to fit your budget now that a budget has been established. That’s negotiation. But you wouldn’t get a Big Mac™ for the price of a hamburger at McDonald’s. McDonald’s wouldn’t discount with you. They live with the risk you might walk, and you need to do the same thing.
Lots of Ways to Raise the Budget
Rule #5: Learn how to negotiate once the budget has been established. In our High Gear training for account handlers and agency personnel who have to negotiate with clients on a regular basis, we have a full range of negotiation tools to help agencies earn more money when dealing with clients. Even when a budget is in place.
Get Permission To Sell Up
Rule #6: Always get permission in advance to sell up a client meaning you bring back a solution for more money than was originally discussed. Trying to “up-sell” without permission is a very bad strategy, and you shouldn’t let your agency get involved with that course of action. Up-selling sends a loud message that you don’t listen and can’t follow instructions. You want to get permission in advance if you plan to bring back more expensive solutions that fit a larger budget. Otherwise you may get caught in the position of giving away the more expensive solution you came up with at the original budget. And that’s serious discounting.
Look For Chances to Negotiate
Rule #7: Always offer to negotiations by asking what we call the “Money Question.” It starts the same way. When a client is explaining a new project you will need to handle, ask the Money Question this way: “In round numbers, how much money are you thinking of spending on this project?” You want to get the money and the client expectations set right then and there. Never ask what the budget is. Or ask how much money the client has. Or a hundred other dumb things agencies say when they should be entering into negation. It’s hard not to talk about money when you ask the Money Question the right way. It’s always, “In round numbers…”
By starting to negotiate over the solution cost when we can still negotiate over the solution specs allows you to cut out most discounting. Learn to use the Money Question on a regular basis with your clients.
Avoid Discounting Your Services
"Educating your account team in negotiation will benefit your agency for years to come."
Agencies that end up discounting send out signals that their work isn’t important or valuable. And they also send out signals that our profession isn’t respected either because they are moving us towards a discounted profession. Help us all out by negotiating and not discounting by using these rules of the road.
Work SMARTER, Not HARDER.
Our High Gear training shows account management professionals how to manage the client relationship better using personality profiling. Once the client’s personality and personal working style are identified, High Gear can show your team how to plan better, present better and negotiate better. This approach makes the client/agency relationship stronger and more profitable for your agency. For more information on how to get negotication on your side, contact us at info@sandersconsulting.com or just give us a call at 800.899.1538
