Matching Professional Buyers with Professional Sellers

How to Achieve Success in Agency Compensation Negotiations

Tim Williams, Ignition Consulting Group | www.ignitiongroup.comhe first step in improving agency compensation is to commit to making pricing a core competenceof your firm. In addition to a senior executive in charge of costs (Chief Financial Officer), assign asenior executive in charge of value (Chief Value Officer). Match the client’s professional buyers with the agency’s professional sellers.Here are some of the key principles employed by pricing professionals:

Stay focused on the truth that clients are not buying your costs; they’re buying outcomes, value,and utility.

Help your team understand that there is no relationship between cost and value. Yourcost should not become your price. Stop estimating and start pricing. Stop negotiating cost andstart negotiating value.

Use the language of utility and value in place of the language of costs.

Construct RPF responsesand new business presentations in a way that showcases benefits, outcomes, utility, value, andoutputs rather than features, hours, inputs, activities, and efforts.

Approach every compensation dialog with this question: how can we align our economicincentives?

Make it clear you don’t view compensation as a zero-sum game.

Instead of fighting with your client for a bigger slice of the pie, find ways to grow the pie.

Signal to your client early in the process that you’re willing to walk away.

You’ll never have anyleverage in a negotiation the client believes that you’ll do anything to get the business. It’scounterintuitive, but wanting them less makes them want you more.

Insist on transparency of expectations in place of transparency of costs.

Show how it’s in theclient’s best interest to discuss expected outcomes instead of expected costs. Costs are theseller’s concern, not the buyer’s. (Do you know what it cost to build your iPhone?)

Match their process with your process.

Early in your discussions, introduce the fact that you alsohave a process: Scope of Value before Scope of Work.

Use the principle of anchoring to get a better price.

The first figure named in a negotiation has theeffect of shifting the other side’s expectations of what it will have to pay. In a very real sense, themore you ask for, the more you get. Above all stop practicing reserve-anchoring, which resultsfrom raising the possibility of discounted rates which actually lowers price expectations.

Package your services and solutions in a way that makes them difficult to compare.

Remember that there is

margin in mystery. By offering services or expertise not found at other firms, you cancommand premium pricing. Make your margins on the high-value services you provide -- things that clients can’t do for themselves. Stop trying to earn profits on the commoditized side of yourbusiness. Keep in mind that the buyer’s job is to level the playing field. Your job is to make yourservice offering incomparable.