After you’ve had calls with the marketing agencies or consultants you are considering hiring to help you solve your business problem or take your business to the next level, you’ll probably receive formal proposals from them that contain project scope and pricing.
So what’s next?
I’ve spoken with a lot of people (2,000+) over the last few years about hiring a marketing company or consultant. Many have a great understanding of what they are looking for, but when it comes to selecting and negotiating there’s a lack of knowledge.
This is totally understandable since there is not much (good) content online about what you can/should negotiate and what you shouldn’t/can’t.
In this article we are going to cover:
- Why a proposal is a starting point, not a final offer;
- What to negotiate within a proposal;
- What to not negotiate within a proposal;
- How to choose.
A proposal is a starting point
Let’s get this out of the way first.
There are two different ways to approach finding an outside company to work with (marketing or other):
- Blast out a broad Request For Proposal (RFP) and invite companies to submit their best offer, then shortlist and select from there;
- Speak with individual companies and ask them to send you a scope of work and proposal if they think they can deliver on what you want and need.
At Credo we take the second approach because we believe it is better to expedite getting in front of the companies who specialize in what you need.
Within this approach, proposals and working towards an agreement are not final until you have signed a contract. When an agency or consultant sends you a proposal for doing the work, that initial proposal is not their final offer. It is a starting point for a conversation.
Of course, at any point either party can walk away if either side doesn’t think that what you are working towards will either reach the goal or be a successful project.
Everything within a proposal is negotiable – price, scope, structure – but you have to do it well and in a way that ends in a win-win situation for both parties.
Money decisions are emotional, not logical
Before we get into negotiating on a proposal or evaluating proposals, we need to talk about how we make money decisions. This is true across business and personal – money decisions are emotional. We can get beyond it, but not before we recognize that money makes us feel certain ways because of our backgrounds and fears in life and business.
From a psychological perspective, we are all budget-conscious. We like to think that we want to know first what we are going to get, and then what is going to cost us. In reality, too many of us first look at the price to see how that hits us or meets our budget, and then what the offer is.
Do not forget that money is inherently emotional. We want to think we are making rational decisions around money, but really we are making emotional decisions most of the time when it comes to what we spend. Just take a look at all the books written about money being emotional and how to get past them:
The next time you receive a quote from someone for something, pay attention to your emotions. When you receive a quote that is higher than you expect, instead of saying “that’s outrageous and we can’t afford that” ask “Why is this so much higher than I expected and is it worth it?”
Of course we all have an absolute max we can spend. No one has unlimited dollars to spend even if you’re Google or Apple. Everyone in business has a budget that we cannot exceed, but even within the available budget I have seen people balk at specific pricing without even looking at what they are being proposed for that spend.
With that said, let’s talk about negotiating a proposal.
What to negotiate within a proposal
There are two common questions I hear at the proposal stage.
From the agency side, I hear “Why do people just go directly to the budget section without reading everything else?”
From the client hiring side, I hear “What can I negotiate on within the proposal, and is this the final offer?”
I firmly believe that everything in the initial proposal you receive is negotiable but only if you do it in the right way.
The common approach I see people take goes something like:
“That’s too much. Can you do it for less?”
Negotiating on price alone is a losing strategy and here’s why.
If someone quotes you $5,000 for work and then agrees to do it for $4,000, why are they doing that? There are a few reasons:
- Maybe they’re hurting for new clients and just want to sign you, and were trying to take advantage of you with their first quote.
- Maybe they’re bringing on new employees/trainees and can bill them to you for less. So you’ll have junior people on your account.
- They’re willing to do it for less, but this also means you’ll be one of their smaller clients and thus won’t get the same attention as a larger client.
- And others.
Is this the kind of company you want to work with? One that might be trying to take advantage of you, or is going to put junior people on your account? The fact that agencies have to prioritize clients who are paying them more over those who are paying them less is inescapable, but is also something that you should be aware of. The smaller your account, the less attention you will get.
A better way
If the price is higher than you can or want to pay, then there is a way to get it down. I always say:
Negotiate on scope, not price.
Asking for a discount without asking for fewer services/products is like going to the grocery store, getting all the things you want, and then telling the cashier “Can you take 10% off of that?”
They’ll laugh you out of line most likely, or just tell you no. Or realistically, they’ll tell you to take something out in order to get the price down.
It’s the same way with a proposal for professional services like marketing. The kind of company you want to work with will not cheapen their rate just because you ask, but will work with you on a scope that they still believe will bring you value but is more in line with what you are able to pay.
The conversation isn’t fun, but if you truly want to work with them then you are well within your rights to ask “What can we do to bring the price down to $X,XXX?” The company may not have each item priced out individually (though I do recommend that they do this so that you understand what you are getting), but if they do then you have more knowledge and can determine if specific things they are quoting you are worth it to you. You should allow them to explain the value that specific things will bring you, and then you can make a decision about what you want to invest in or not.
Negotiate on scope, not price.
What to not negotiate within a proposal
This section is a bit tongue in cheek. Everything within a proposal is negotiable, but once a contract is signed it is no longer negotiable unless you want to go back and renegotiate the contract, which also leads to a delay in the work getting started.
This said, sometimes you cannot negotiate everything within a proposal because the proposing company does not believe that what you are asking for will actually get you the results that you are looking for.
This is a good thing.
When you are speaking with a company that won’t take your money for a reason like this, you should pay attention! That company is trustworthy. They don’t want your money for something they can’t deliver on.
How to choose a marketing company
Choosing a marketing company is a tough challenge regardless of your experience and budget. This is because it’s not just about whether they can do the work, but also if they can do it effectively within budget and if you like working with them. Ultimately it is about results, but the others leading up to it are just as if not more important.
After three years of running Credo, I am firmly convinced that most people will continue working with someone they like a lot who is getting them good results. They may think that someone else could get them better results, but that is a risk that they are reticent to take, and understandably so. Fear of loss is stronger than hope of gain.
Our full guide to hiring a marketing company is here that you can download and read at your leisure, but to boil it down in order to choose a marketing company you need to look for:
- Do they have experience with my kind of company that they can show me?
- Can they work within the budget that I have?
- Can they explain well what they are proposing to do and the results they think it will get me?
- Are they willing to discuss the project I want and propose that to me?
- Do they listen to my needs and desires, and not try to upsell me unnecessarily into things I don’t need?
- Are they transparent about the work they are doing and what I am paying for?
- Can they define how the effectiveness of the project is measured?
If you start with the above, you will be ahead of 90% of companies looking to hire a marketing company. These seven questions alone will help you eliminate the companies that are wrong for you and get you to the ones who should be pitching you for your business.
Over to you
What have you seen work well when negotiating with an agency? And for the agencies/consultants out there, what other advice would you give to clients to help them do a better job hiring an outside marketing company?