Editor's Note: This article first appeared on Business 2 Community and was curated by Closer Spot. Please subscribe to get actionable news and advice delivered to your inbox each week.
Got a client who wants your agency to cut your rates, without cutting the scope? Stand firm—don’t offer a discount without a scope reduction!
An agency owner and coaching client recently asked me:
“I’d love to get your take on a client of ours. The online bank is currently our largest client, but they have also been a huge pain. Long story, but the latest is they think our hourly billing rate ($175) is too high and want to see us lower it, and/or put different billing levels into place for different staff members. He also wants us to potentially switch to fixed-scope vs. [flexible hourly] retainer.
I’m wondering if you’ve had clients who have been asked to lower their agency billing rate, and how you would approach this?”
Short version? Don’t give clients a discount when they demand it—it’s a slippery slope, and you’re setting a bad precedent.
Instead, here’s how to fight back—and preserve your dignity—when a client wants a discount from your agency.
Three Steps to Fight BackThe right solution depends on your bargaining position. If you have a Client Concentration problem (this client is more than 20% of your business), you’ll need to take steps to fix that before you push back.
1) Use an example from their industry. For example: “I’m curious, if one of your depositors said they wanted you to pay them 3% instead of 1% on their savings account, how would you respond?” And then hold your tongue so they can be uncomfortable and respond.
They’ll probably make some excuse about products vs. custom services. You can also create an example from their prior job, if their current industry doesn’t lend itself to this comparison.
2) Reframe the conversation to be about value. Ask: “What value are you getting from your work? [Pause to let them share] If you’re not seeing value, we can reduce the scope of what you get, but just as your interest rates aren’t negotiable, our hourly rate is not negotiable.”
3) Weigh alternative pricing models… if you’d even consider them. Can you do it profitably? For instance, if they want a fixed-scope arrangement but they constantly want change orders, you and they will both be frustrated. READ THE FULL ARTICLE...