In the competitive RPO market is it all about price?
I was discussing the importance of price during the sales process with some senior RPO execs the other week. It was noteworthy to me how many of them believed that price had to be the primary differentiator between their company and their competitors.
They were convinced it didn’t matter how superior their service offering was, in the end the client would choose who the RPO provider they wanted based purely on price.
This isn’t surprising I suppose. There are an increasing number of credible RPOs out there battling for business and the pendulum is constantly swinging in organisations between RPO and in-house recruitment models. So competition is fierce!
And this is not the first time I have heard and seen this. Whilst I was helping a large RPO/MSP to improve their sales performance, it became apparent that they were bidding on opportunities they would never win. This was because their primary qualification question was – “Can we deliver the service at the lowest price?” They took no account of their understanding of the need, the unique suitability of their solution, track record in delivery, or even the strength of their relationship with the prospect.
But RPO is a complex, people driven service. RPO is not a high volume commodity mass produced in factories. It doesn’t lend itself well to operating strategies that focus on squeezing cost out. As soon as reducing cost is the driver, we have all seen service levels quickly start to deteriorate.
RPO clients want value first!
RPO clients need great “value for money”, and the key word here is value. My experience is that clients are prepared to pay a premium for a service they perceive to be delivering more value than the alternatives they are looking at.
I don’t mean value in a strictly financial sense but value from the client perspective. In this context it means:
“Can the RPO provider deliver: 1. exactly what I need; 2. better than anyone else 3. at lowest risk to me? 4. And can I work with them?”
The RPO who has this position will be able to negotiate a fair price – certainly a better price than their competition. This will allow them in turn to deliver a great service, have a happy client, and make some commercial return.
I have led numerous roundtables on the subject of RPO, coaching organisations on how they should outsource their recruitment. Almost without exception they all agreed it would be better to pay a little bit more and receive a great service than to try and negotiate a supplier to a price below what is economically viable. Doing the latter will inevitably lead to a poor service, and an unhappy relationship between all!
We should take note of John Ruskin who said:
“It's unwise to pay too much, but it's worse to pay too little. When you pay too much, you lose a little money - that's all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do.”
Buyers get this. They understand that the lowest price won’t necessarily give them the best deal. They want value!
We love you – you can do anything!
The key question for an RPO when developing a sales strategy is not therefore “how can I offer the lowest price?”, but “how can I demonstrate and deliver the greatest unique value?”
This can be difficult for an RPO to define, and often quite uncomfortable.
Typically when I have worked with RPO’s to try and define their unique value there are two default starting positions:
These are both really commendable. Full service and being positively viewed by clients is great. But the problem is that all their competitors are saying exactly the same thing. It doesn’t give your prospects anything different to choose from.
The challenge for an RPO is to dig into these two statements and find out:
Value means focus!
The answers to these questions can mean facing up to difficult truths. Perhaps not all of our clients love us as much as we think? Perhaps there are some services we aren’t delivering as well as we want to?
So the secret is to identify where both client love is high and service performance is excellent. Find this intersection and you can start to understand how you deliver unique value to your clients. This is where I would recommend an RPO starts searching for its unique value. Look for those specific areas where you are doing something different and better than anyone else.
Typically you will determine expertise and successful delivery of your service in various areas. For instance: particular industries/sectors; specific types of recruitment (volume, niche, graduate?); and particular recruitment process areas (employer branding, onboarding?).
RPO sales is an expensive and often frustrating activity. Many RPO’s struggle to win new business – which is why they resort to a price led strategy.
I know there is reluctance by some RPO leaders to focus their sales effort as it can stop them bidding for deals they would have previously gone for. However by doing so they will without doubt make their sales activity more cost effective, increase success rates considerably, and be able to charge a fair commercially viable price.
Focussing on your unique value is the key to success for RPO's - not price!