I got into a conversation with the guy standing on a step-ladder changing light bulbs while I waited for my wife as she browsed the merchandise in a boutique clothing store.

Being the old school recruiter that I am, I quickly discovered that his name was Fabian, he was the owner of the store, it was newly opened store in the area, and we were his very first customers.

The reason why I am blogging about this conversation is because this guy said a few things that has some application to the recruiting industry from the agency model perspective.

Here is some additional background information on Fabian: He is forty years old, he has been in the apparel business (whole/retail) for the past 20 years. He has successful boutique operations in New York and he is now replicating the success model by expanding in South Florida.
His business model is very simplistic: Provide a quality product at a reasonable price and let the product sell itself through word-of-mouth marketing!

Word-of-mouth marketing has been around for a while; it is a positive on-going discussion taking place between customers and perspective customers about the merits of a product, solution or service. Otherwise known as social media.

Let’s take a closer look at his business: He competes directly with Wal-Mart and the major retail chain stores. The only exception is that he specializes only in trendy women apparels that he can retail for $30.00 or less per item. He purchases ahead of the latest trend and as a result gets lower pricing from his suppliers. He seeks only a 20% profit margin verses the 35% margin of the major retailers.

How can a small retailer expand his business in a recession, generate profit selling his product at a lower price, and compete with the big boys?

By selling in volume!

Here is how the concept works: Major retailers will stock and promote the identified products. Demand for the product is elastic, meaning that consumers will gladly purchase the identical product from another source if it is of the same quality at lower price. More important, they will tell their friends where to buy the lower priced product; friends will tell their friends, who will tell their friends, and so on and so on. The end result is that Fabian will have a growing client base of happy customers who are saving money by doing business with him. He is able to meet the increase demand for his product at a price lower than his competitions not because his wholesale price is lower, but because he pays little or nothing for promotion. And we know the impact of advertising on generating sales and how expensive the cost can be.

His business model will work with any product or service in any industry or in any market conditions.

How will his model applies to recruiting?

Instead of the “one size fits all” “all or nothing” “take it or leave it” full placement fee approach, why not offer your clients or new clients different candidate search options and let them decide which is best for their situation.
Before anyone get stressed out about lowering fees, let’s take a look at the situation form the client’s perspective.

Organizations today are having a difficult time managing their internal recruitment process- sifting through hundreds of resumes for each job order, working with limited budgets, and reduced recruitment staff at a time when the stakes are higher for hiring the wrong applicant.

Here are two scenarios:

Working with Clients who are recruiting on their own:
For the same price as a single job posting on Monster or CareerBuilder, why not assist your clients in writing the job description; input the data into your ATS which will advertise the job posting on your website, Simplyhired, Indeed and all over the Internet. And as a value ad, email the job description to qualified candidates in your proprietary database and social networks. And allow your clients to manage the resume flow through your ATS. How much will that cost you?

Clients value Search Assistance but cannot afford the full Fee

For a price lower that the standard fee, why not offer an outsourced service option where you do all the heavy lifting for your client:
Search your proprietary database and social network and notify all qualified candidate within the network of the job opportunity.
Write the job descriptions; advertise the job openings on the major job boards, niche boards, local job boards, free job boards, search engines, social media sites as well as your recruitment website.
Manage the resume flow, identify, prescreen and submit only the qualified and interested candidates to clients.
Assist in the coordination of interviews, perform assessment testing/background checks, provide interview feedback and also assist in negotiating acceptable job offers.
Your clients will stand a better chance of finding the right candidate for their open positions faster than doing it on their own. It is also less expensive than the traditional placement fee if the right applicant is found using this option.

Word of mouth marketing takes effect when two elements are present; a quality product or service delivered at a price lower than the competition. In both search options, you are not being paid to make placements; your role is to assist your clients in filling the positions on their own. You are providing these value-ad services to generate word-of-mouth marketing for your business, not just in this slow economy but to solidify your value when the economy does turn around.

Fundamental economics will tell you that in a slow economy, a high quality product/service at a premium price will generate less profit because consumers will naturally seek lower cost alternatives because of budgetary constraints. “You can’t sell an outdated product at its out-dated price, people won’t buy it” Fabian said…

If you have invested in a high caliber ATS and other search technologies, your services can be profitably delivered below market. Now is the best opportunity to start testing these new social media tools as a vehicle to communicate your value proposition to your clients, new clients, in a new market or industry.

One additional bit of information: Fabian is a super-cool guy with a high school education!