One of our popular business skills workshops is ‘Fee Negotiation Skills’ which is not a huge surprise. Any improvement in negotiation skills normally has an automatic positive effect on bottom line – and we have a few ‘magic’ tips, planning and execution strategies that can have huge impacts.
However, the foundation stone of effective negotiation (if you are in the supplier role) is real confidence and belief in the value of your product or service.
What do we mean by this? Well to explain, I believe the famous story / urban myth goes something like….
A man approaches Pablo Picasso (or Van Gogh, or Dali….I have even heard it was Tony Hart!) in a restaurant, introduces himself and says….
“Sir, I am honoured to meet you. I am a huge admirer of yours”
Artist…(lets go with Picasso): “Well thankyou very much”.
Man: “I was wondering Sir, as nobody would ever believe that I have met you here (this was before camera phones), and because it is my wife’s birthday soon, whether you could just do a quick sketch of my face”.
Picasso: “Well as it will be a few minutes before my next course, then I would be very happy to. I just need a pencil and your best side”.
Picasso quickly sketches the mans face, and hands his work over. Delighted the man reaches for his wallet…
“As compensation for your time Sir, I will pay for your meal. Here, take £25”
Picasso: “Well that is very kind of you, but actually the sketch is worth £10,000”.
Man: “But it took you 30 seconds”
Picasso: “Actually… It took me 30 years”.
Sadly the story ends there so I have no idea what was the outcome. But the meaning is clear. Mr. Picasso had absolute belief and confidence in the value of his output. The time taken was irrelevant. He knew that the work was of a quality that few others could match, that his style of delivery was virtually unique. And that this was the result of thirty years of experience, learning, effort, practice, skill building and knowledge.
We believe that many top quality professionals often struggle to grasp the real value that is provided to a client through a piece of work, piece of advice, computation, legal document, plan etc.
So ok, an audit report or some legal recommendations may not have the same wow factor as a Picasso sketch, but just have a think about what, exactly, the client is really getting for the fee! It’s usually a lot more than just that piece of work:-
If we have absolute confidence in our value, in the firm and our quality, then we can be clear on price and ensure that we are not ‘giving it away’.
And at this point during a workshop, the hands usually go up!!.
“yeh that’s all well and good, but in the real world it’s all about the price. So what happens if a recurring client tells me that they have had a quote from another firm that is 10% lower and are looking for a reduction?”.
Good question! The first thing to realise is that this could actually be an opportunity… for an honest and open, relationship building conversation with the client!
Here is your chance to get all that you do out on the table (and also find out just what your client really values). The fundamental problem is that many clients do not know just what they are getting for their money. Is the reduced fee from the other firm reflecting the same range of benefits and value? Will they do everything that we currently do? More than likely not.
Car-wash’s make this easy don’t they? They have a range of maybe five different service levels from basic wash through to hot waxing. And a range of prices, meaning that the customer can easily match price to value.
Now in these days of fee pressure, it may be that the price is the primary buying driver of the client. But don’t make this assumption before they are aware of all of what you do for them. And if it is…and you want to keep the client, then by all means reduce the fee!
But….to maintain the profitability equation, it’s then vital to reduce the value by negotiating an equal reduction in the components of the fee. I.e.
‘ok I’m happy to reduce price but this will mean reducing the number of free meetings from three to one per year, or decreasing the size of our final report to 4 pages from 12”. Simply, trading to maintain price to value.
The alternative is ‘fee-crumbling’, which is usually a phrase very often found in case study’s of failed firms!
And hey, when you have that conversation, it could well be that you discover that the ‘other’ firm are not even offering one meeting, or have a standard 3 page report! They may be lacking some fundamental areas of expertise and service within their firm.! That’s the point… its about ensuring the client is aware of your ‘car-wash service level’ (or that you are the Picasso of your profession) and therefore is able to compare like with like!
*** As a footnote, I have just tried to sketch a face onto a napkin….honest assessment of value.. sadly 25 pence. Which is probably less than the price of the napkin in the first place.
theGrogroup specialise in helping Professional Service Firms grow business results by optimising: strategy, talent, business performance and business development.
If you would like to discuss any aspect of individual and business performance, and possible solutions please contact us on 01892 610060.