Insights

The worst time to drop your price to clients

Now is the worst possible time to give away agency margin. Negotiating with clients during the current crisis is more challenging than ever for many agencies., consultancies and designers. Clients will be moving the goalposts and putting their agencies under more pressure. Both financial and emotional pressure. Clients will be squeezing you for so much more for a lot less. The client’s CFO will be putting their marketing team and their agencies under massive pressure. Now is not the time to give away margin. In fact, it’s simply the worst possible time to give away margin.

However, it’s a delicate and tricky time. We want to be seen by clients to be supportive and ready to help, especially in the current climate. We don’t want to be seen as unhelpful or intransigent. So, beware of hasty decisions without thinking through the longer-term implications.

I’ve spoken to many agencies over the past couple of months. Some of the agencies’ clients are in dire straits – their businesses having completely fallen off a cliff. I have so much empathy with those businesses. I certainly can put myself in their position and see it from their perspective. A nightmare in some cases. There are other agencies whose clients are growing faster than before the lockdown.

Having run ‘Business Growth’ and ‘Profitability’ workshops for agencies both live and remote/virtual I can clearly see the pressure agencies are under. However, as an agency you’re a commercial business too. Of course, let’s help our clients but it must be on our terms. Terms which we won’t regret in 6 or 12 months time. You decide what those terms are. It’s easy to be too generous when we’re under pressure by clients.

Examples of what some clients are saying right now to their agencies:

  • “We need to cut costs substantially and deliver our original growth target”
  • “We’re moving to payment by results”
  • “We need more support from you, as we’ve less internal resource, but there’s no more budget”
  • “That’s non-essential spend – there’s no money for that”
  • “Our payment terms are increasing by a further 30 days”

Here are 7 steps I’d recommend taking…

  1. Review. Review each of your clients in terms of their importance to your agency. Look at their profitability and potential. Consider where you’d like the client-agency relationship to be in 12 month’s time with each client. Decide how ‘generous’ you want to be.
  2. Anticipate. Then anticipate what you’ll say to each client if they say to you any of the earlier example statements. Are you prepared to say ‘no’? Can you compromise?
  3. The client’s no1 agency. How can you become the client’s most trusted partner going forward? Now is the time to raise the bar in your client-agency relationships. How can you be a proactive strategic partner helping your client move forward? How can you become their No1 agency partner? Now’s the time clients are more likely to listen to your proactive proposals.
  4. How can you help the client? Think about what you can do to help the client that won’t be too costly for the agency. eg
    a. We can’t work for free but we could cap the monthly fee at £xxxx and flag up as we approach it each month.
    b. Let’s prioritise the different projects we’re working. Which is the most important? Which is the least important? Let’s put that less important project on a back burner for now.
  5. How can the client help you? What could the client do for you? What could you and they trade with each other? What could you get in exchange?
    a. Connect with their CEO or MD. Now is a great time to build new senior relationships.
    b. An introduction to another colleague or company in their group.
    c. A referral to another prospective client.
  6. Update the contract. Can you change the terms of the contract?
    a. Extend the contract to three years in exchange for 3 months at a discounted/half rate.
  7. Beware of precedents. Think through the implications of your decisions now and their impact in the future. It’s easy to be over-generous now which we then later regret. Decide which of your clients you can be more generous with and which ones to be least generous with.

These are a few suggestions for agencies to consider. Step back and think. What can you do to improve the client-agency relationship?

I’m running online virtual training sessions which are getting great feedback. Can I help you and your agency navigate through these challenging times with your clients? Drop me an email chris@spring8020.co.uk

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