More cool tips on dealing with clients who want a fee discount

Last week I blogged about how you need to move the focus away from dollars and percentages when clients negotiate fees, and on to your value and your differentiators.

One of the comments on my blog from Matthew Lancey raised the point that sometimes clients keep pushing, and they say something like “but your competitors charge less”.

And it’s this use of the “C” word that often scares recruiters.

The “C’ word? Competitors. I love it when clients use that word. If they do start to talk about competitor’s low fees, your response is to ask…

“Can you tell me about a situation, Ms Client, where you were charged less than the fee I am suggesting today, where you got the level of service and the calibre of talent you want – on a regular basis?”

True, this is a gamble, but the fact that you are there, in the client’s office, taking the order, or even on the phone taking the order, means that it is most unlikely the client is happy with their current supplier. In fact it amazes me when a client spends 20 minutes bagging another recruiter, and then when I quote my fee – he says, but the other recruiter only charges 15%!

That’s is the time to remind the client that a low fee, quoted by a supplier who does not deliver, is not a benchmark you will measure your fees against. And nor should the client.

Sometimes the client pushes hard for a reduced fee. When that happens, don’t feel pressurised. It’s a purely commercial decision – and it’s your decision to make. Is this client and this order so attractive it is worth taking a lower fee for?

Remember this before you discount next time. Don’t think of the fee only as dollars gained or lost – think of the fee as what your service is worth. A discounted fee means a discounted you – never forget that.

But sometimes you feel it is worth a compromise to secure a particular opportunity. In these cases I emphasise one golden rule.

Never reduce your originally quoted fee without extracting a concession from the client.

In other words if you say, “My fee is 20%”. And the client asks for a discount. And you quickly respond with “OK how does 15% sound?”. You have just signaled to the client that you never believed in your value proposition and your service in the first place. You will struggle with getting his respect ever again – and you will never get your fees back up.

So if you reduce your fee, always ask for something in return – exclusivity maybe, client paid advertising maybe, client gives you multiple orders maybe, or maybe you waive the guarantee.

Make sure the negotiation involves both sides giving. This way the equal partnership is in tact.

So is your self-esteem by the way. And in our business, that’s crucial.

For all my blog posts please see 'The Savage Truth'

Comment by Jerry Albright on November 22, 2010 at 10:42am: I've said before and will again - the vast majority of "competitors" out here provide a service which is nearly identical. The only difference the clients see is the particular letterhead of the resumes being blasted to them on a daily basis.

If we were to look at the service/approach of 100 different agencies the similarities would far outweigh the few (and far between) differences.

Post job. Get resumes. Send a quick email confirming they are a live person. Shoot resume to client before the other agencies do. Repeat.

95% of "us" would be hard pressed to identify any particular level of service any different from the agencies already in place with these clients.

Comment by Paul Alfred on November 22, 2010 at 11:18am: Jerry you make a great point and this is why, when you talk to the HR Executives who work for the Fortune 1000 looking at the service they receive from your 95% you speak off - they paint the Third Party Recruitment industry with a bad name .. Its pretty scary if that is what sums up the service we provide to our clients ...

Comment by Sandra McCartt on November 22, 2010 at 11:41am: there is always a way to "trade off" a little discount on one level of position with an escalation of fee on another level. ie; sales reps are easier to find than research scientists. A flat fee on sales positions at less than 20% with a bump to 25% on scientists. Or discount of a fee for multiple position listings in the same vertical. ie; client is hiring 15 new sales reps in Jan.
The way i do the math, 18% of something is more than 30% of nothing.

Comment by Jerry Albright on November 22, 2010 at 11:44am: But Sandra - with that logic - isn't 5% of something also more than 30% of nothing?

Comment by C. B. Stalling!! on November 22, 2010 at 11:59am: The only way I would lower my fee is for a 5,000 retainer a month. Then the client has some skin in the game too.

So if the total fee is $15,000 then once placement made he owes me 10,000...

Comment by Sandra McCartt on November 22, 2010 at 12:39pm: IT certianly is Jer. Just depends on how tough a trader one is and what one thinks it's worth to cast a little bread on the waters and see if it comes back ten fold. 5% of 10 exclusive listed,100K placements is also more than 30% of 1 that one has a 50% chance of filling,100K placement. I have never done any at 5% but i might depending on the circumstances. I have in fact given a few away to get a lot of business in the future. Depends on how busy i am, the difficulty of the search etc.

Comment by Slouch on November 22, 2010 at 12:44pm: CB, It is insanity to lower your fee if the client agrees to a retained search. You should raise your fee under those circumstances. It requires more of a commitment on your part.

Comment by Ann Luna on November 22, 2010 at 2:31pm: With out fail the clients who press me for a discount are the most difficult across the board. They pay late, they have high turnover, they want to hire only people with longevity, they have the longest interview cycle. If they bring up "the competition" firms, I imagine they are getting the leftover, non-qulaified resumes which is why they are working with many recruiters. One client asked for a discount on a job that has been open for 9 months - really?

Comment by Greg Savage on November 22, 2010 at 3:55pm: With out fail the clients who press me for a discount are the most difficult across the board.
One hundred percent agree Ann. That is my experience over many years. It starts bad... it almost always ends bad. The heavy fee negotiators are clearly not seeing value in the service and as a result they do not "partner" through the process.

Comment by Jason Monastra on November 22, 2010 at 5:56pm: I am quite surprised by some of the comments of the above mentioned members, specifically those that quote that there are no differences. If you are not able to adequately display the differences between your company and the competition, my suggestion is that you sit down and itemize what makes you who you are, then translate that into company benefits. If there is no difference, if you are part of the crowd, then the ability to negotiate is limited. Simply give in and take what you can get.

Though we do not recruit as recruiters being an IT integrator, we recruit for ourselves in the support of the large federal contracts we service. To do this effectively, pulling people from other vendors, as well as getting the clients to select us - we needed to come up with a specific model that made a large difference between us and the other companies. We looked at who agencies used, what we did and then drew comparisons. After evaluating, we picked the most audacious of the differences and now sell them in a direct and complete package. For example - we are mid sized, able to deliver on-shore and off-shore services but at 30% less cost than the big guys. Translation, get the larger firm service that you need but at anytime pick up the phone and touch base with one of the partners if it is needed. This gives clients the comfort of ensuring their IT services are delivered, plus they can feel as if they are the most important person since they can speak to a partner if required without a hassle. This is huge as mid level managers cannot get decision makes on the phone from companies like IBM, Accenture, Lockheed Martin, etc.

Figure out your space, your specific niche and your personality or model traits that make you different from the rest. When you find those, package them and sell them. When you do that, price rarely is an issue as you are no longer viewed as a commodity.