Monday, October 26, 2009

Hold the Line on PR Compensation

I spent nearly four months carefully cultivating a new client opportunity.

All signs pointed positive. The lead came from a trusted relationship. The prospect competes in a fast growth segment of the market. The CEO invested time with us throughout the process. I qualified the opportunity on budget – twice.

The CEO personally called with the good news. “You are the agency for us,” he explained. “There’s just one thing I need your help on. One of your competitors offered to reduce their fees by half to represent us. We’d like you to do the same as an investment in the relationship.”

Ouch! That opportunity blew up.

Admittedly, we did consider the rate cut to secure this promising piece of business. It is a sluggish market and clients know it.

Ultimately, we held our ground on our requested compensation and, as a result, the prospect elected to retain a different firm.

This recent experience reflects what continues to transpire across the spectrum of marketing, communications, advertising and public relations firms. Clients are squeezing margins while demanding a comprehensive set of services.

It’s gotten so dire that industry rag Advertising Age recently implored firms not to “cave” when it comes to negotiating the financial terms of a relationship.

This is no criticism of clients and their desire to achieve the most favorable conditions in a vendor relationship. Their responsibility is to their own profitability and financial well being.

It’s up to us as service providers to hold the line on fair compensation. We collectively complain about feeling undervalued, yet then roll back the prices like a Wal-Mart Supercenter.

Ad firms and PR shops need to demonstrate flexibility during a difficult economy. However, it’s equally important to recognize the terms that create an unprofitable piece of business and then have the will to walk away.

3 comments:

Wonderwoman0126 said...

I agree with you on this one, Marc. I know times are tough for all agencies, but your competitor is clearly selling on price vs. value. As a former salesperson, I've never sold based on price alone, whether product or service.

It is your perogative to walk away from any potential relationship where you are not adequately compensated, just as it is the potential client's perogative to go with the lowest cost provider. Soooo, maybe you could procure the winning agency's services on a wholesale basis to fuel your own growth - LOL.

When I was a freelancer, I was undercut a few times, held my line and simply chose to focus my billable hours on clients who are willing to pay for quality, value and results. Those clients still exist. Your time is all you have to sell, so you can sell below cost and sink the ship or hold the line where you can make a fair living. Hold your line, and you will most likely be in business long after your lowballing competitors and their clients have run their courses.

twoolf said...

Your right on here, Marc. I wrotes about this same issue on my blog (http://www.woolfmedia.com/wordpress/2009/08/pr-pricing-limbo-how-low-can-you-go/). Having seen the market go up and down, it amazes me that PR professionals don't realize they are cannibalizing future profits. When things improve, they will be stuck with bargain basement prices. Better to hold the line if you can and protect your reputation and future revenues.

Wonderwoman0126 said...

YES, Twoolf! It's bad practice for the entire profession, but as always happens, some are only interested in their own short-term gain (or survival) than the good of the whole and/or their own long-term.

Again, everyone has to make that decision and live or die by it. Selling based on price alone is never good practice, whether product or service. There is nowhere to go but downward.

"Quality is remembered after price is forgotten." This will never change. Good luck to the firm who won the business. I hope they can deliver. If not, the client will be calling Marc back and he can decide whether to re-engage or walk. Marc, it may not be over.