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Monthly tips to improve the business and practice of members of The Society for the Advancement of Consulting, LLC - Issue #106: July, 2012


I'm constantly surprised at the amount of mail and calls I receive asking advice on how to deal with clients who constantly want to bargain. I'm surprised because many consultants apparently don't understand that once you make a single concession on price, you've enabled a behavior which will inevitably cost you money and probably drive you crazy.

Requests for price concessions generally emanate from the owners of small companies who are accustomed to haggling with everyone from the coffee vendor to the hourly employees (and who, themselves, are constantly asked to lower price from their customers); and from larger company purchasing departments and low-level feasibility buyers, who see their way to fame and fortune as cutting back on the fame and fortune of suppliers. There are several keys here:

  1. Never offer a concession without a quid pro quo. Once you lower fee-no matter how slightly-or delay the client's payment dates-no matter how little-you have opened Pandora's Box. The client, like Archimedes, will stick a lever in that slightly open door and rip it off the hinges.
  2. Be prepared to deny the request and walk away. If you don't call the customer's bluff, then you don't belong in the card game. I've had buyers whom I've interviewed tell me, "I always ask for a concession because I believe it's good business. I'm shocked at how often they're granted without any resistance, despite the fact that I'm seldom prepared to press the issue if I'm told 'No.' "
  3. Focus on the value proposition and the ROI. When buyers are especially resistant to the price, but indicate they would go ahead with a price reduction, they're really saying that they believe you can help them, but they're not sure how much (so they want to hedge their bets). Demonstrate that even a conservative return will provide dramatic ROI.
  4. Turn the tables. Ask the customer if he or she concedes price on the company's refrigerators, or computers, or insurance policies, or real estate commissions whenever a customer asks. If they indicate that they sometimes do, tell them that's why they need you, to break the habit. If they say they don't, then why should you do it?
  5. Offer non-monetary "concessions." Some people just need the ego fulfillment of having received something for free or at a reduced price. Offer anything from a free book, to complimentary quarterly updates, to free newsletter subscriptions. Provide something to salve their ego so it's not a "win/lose" proposition.
  6. If you're in a larger firm, go back to the economic buyer. Never allow a support person to reopen negotiations on any topic, let alone fees. Tell your buyer that you had a deal and that an underling is trying to undo it, as if he or she is smarter than the buyer. That should put an end to it. Never enter into a debate with a subordinate or non-buyer, which is the equivalent of conceding a little bit on fees. If they find they can engage you, then they'll take you on with a myriad of trivialities.
  7. Always provide options, even to small businesses. If the buyer says, "I love option 3, but the fee seems a bit high," reply, "That's why we have an option 2."

Stop work if you're not paid on time. "Deal-seekers" are famous for delaying payments to squeeze out extra work. If you're not paid in advance, and a payment date has passed, allow ten day and then stop working. Otherwise, you'll be in permanent debt to the company store.

 
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