Money Too Tight To Mention

We are about to renegotiate our contract and monthly fee with a major client. We have had good reviews recently. I am the main account person and will be attending the meetings with our commercial director. However, in such an economic time – when they are looking to make budget cuts - are we about to driven into the ground on costs? It’s happened on other clients.

The thing I see in this recession is that there are no blanket patterns. One day we are hearing about green shoots of recovery in one sector, the next we are hearing of gloomy long term forecasts. I know of agencies really hurting because of what is going on, others (though in the minority) have had their best trading periods. One thing we know is that there are always going to be both winners and losers. So your presumed prognosis of the negotiations is a little premature.

But let’s face it - it is a difficult market out there. You’ve got agencies undercutting each other, others using their existing business to subsidise the servicing of new areas for the client. In fact, you have every example of aggressive business practice – it is just more acutely present in a downturn. I was at a breakfast seminar recently, run by Chris Merrington of the training company Spring8020, and a lot of people there from network agencies and independents were saying that they were facing some pretty harsh challenges. The topic being discussed was negotiations in these difficult times ; it was suggested that agencies need to bear in mind the 3 principles of 1) knowing one’s value, 2) holding one’s price and 3) being confident. Good advice – but what does this mean for your agency’s situation and your personal role in the negotiations?

1) You personally are probably even better placed than your commercial director to know what the various clients value about your agency’s service delivery. You are working with them on a day to day basis. You know what is currently in the minds of the clients. And you are aware what the business or marketing strategy is. This context will help you evaluate whether, for example, it’s your creativity, a particular individual on the team, your speed of response or your board director’s leverage with their CEO which makes you invaluable to them. In your regular conversations with the client (way before the negotiations), you need to be subtlety playing this back to them. In agency performance reviews or new client introductions, you should be doing the same – with the result that when they weigh up moving agencies or downgrading your involvement, it is not an option: they have come to rely heavily on the agency. So, as you can see, this is not something you can cosmetically conjure up for the negotiation but it is something you can exploit within the negotiation if it is there.

2) Holding one’s price is easily said. Many a tough managing director has buckled under the stress of hard negotiation or the chilling realisation that the particular piece of business is vital to the health of their company. But what is more chilling is that even a 10% cut in hourly rates can reduce your margin by 50% - a serious business constraint.
I am not going to go into all the preparation which is needed for such a negotiation but a few thing areas are worth mentioning. Both of you need to have discussed a strategy around how the conversation should go. You both need to know what you are willing to give up and when you need to walk away. You, as an account person, may be more hard-wired to concede to clients’ demands - your commercial director will be able to set you boundaries to avoid this happening. Also if you both have to give some up, get something back in return –whether introductions to other parts of the business, change in payment terms or something as small as inclusive travel costs. In addition, if they do want to cut costs, be a bit more creative and see if it can work in your favour too. (eg introducing an agreed menu pricing to cut down on your time haggling over costs, or automating some processes)

3) Confidence comes from a number of sources. Make sure for example that you and the commercial director are aligned – don’t assume that you are both on the same page –have a rehearsal with a colleague firing different questions at you both. Confidence comes from being able to explain any figures under discussion in the meeting. And ultimately, confidence will also allow you to use time – a very strong negotiating tool – to walk away from the meeting not having agreed everything but allowing you to deliberate your next move.

So, good luck. I am sure I have missed some stuff out. Maybe we might get a few more suggestions in the comments to this post to help you out. In the meantime, have a look at this video. I feel a fraud including it as it has done the rounds a bit in the US – but – hey - as we know from the green agenda, recycling is what it’s all about these days. Anyone who has been beaten down on a project cost will recognise some of these scenarios: