Dear Commercial Acuman...

Dear Commercial Acuman...
In every pitch, we are told that we are the most expensive agency. Can this really be true?

I'll hazard a guess that every other agency in the pitch is being told the same thing - by the same person. There are two phenomena at work here:

Ethical Drift

Ethical Drift is a phrase coined by management consultants; the underlying principle is that people will say whatever it is in their interests to say.

Professional buyers are, almost without exception, incentivised on cost savings in one form or another. At its most basic, if they save some money, they get part of it back as a bonus.

So in any fee negotiation, the tendency must be to say anything that helps with cost-reduction.

Ethical Drift is the process by which someone might move from giving a wholly truthful and accurate picture to creating a potentially misleading one with the intention of achieving their required aims.

But before you get too outraged, ask yourself this - can you be certain it has never, ever happened on your side when pitching for a piece of business?

Have you never told a client they will have your best people on their business while knowing you've just said the same thing to a completely different client? Never claimed to have great experience in an area your agency really knows little about?

Yep, Ethical Drift.

Procurement Conditioning

The next phenomenon may sound like a cross between a conspiracy theory and Jedi mind tricks, but is real nonetheless.

Procurement Conditioning is the process of identifying your strategic suppliers and, over time, convincing them that they are a commodity supplier for the purposes of gaining a dominant position in price negotiations.

Constant repetition of phrases like "you're too expensive" and "another agency will do this for a lot less" have the cumulative effect of convincing agencies that this is actually the case. Inviting a large number of agencies to pitch also achieves the same thing.

It's an only-slightly-less nefarious version of how state-controlled media work in totalitarian regimes; as Lenin said, a lie told often enough becomes the truth.

Procurement Conditioning becomes most effective when achieved on a massive scale - how many people in our industry bemoan the fact that 'the advertising business is oversupplied" and "our competitors always undercut us".

These are the messages that Procurement Conditioning have taught us and we repeat them to ourselves with a faint shrug of resignation, leaving the unspoken conclusion hanging that there really is nothing we can do about it.

The revolution starts here

Professional buyers have a job to do and no amount of crying into your claret will change that.

By failing to become professional sellers we have, as an industry, taught professional buyers that we are something of a soft touch and there are always easy pickings to be had from negotiating with agencies.

Becoming a professional seller does not happen overnight - and there are two key challenges for individuals, plus a third for organisations.

The patient must want to change

Professional Selling is a thing - it has processes and techniques that can be learnt, practised and applied.

But as with the Backwards Brain Bicycle, knowledge is not understanding; it requires what Tim Williams calls a paradigm shift. It's like the old joke that if I was going to Dublin I wouldn't start from here.

Professional Selling requires a complete rethinking of everything about the way agencies sell their services.

So the third practical challenge for organisations is how to change processes that are deeply embedded into the culture of the organisation.

None of these changes can happen overnight, so where to start? I suggest three things:

  • never take anything a professional buyer tells you at face value
  • never reduce price without reducing scope
  • be willing to walk away (where you can)

It is said that 80% of price concessions are given away in the last 20% of a pitch – it is also true that seller power is near its highest when the pitch is down to the last two. At this stage, you have either been selected (but not informed) that you are the winner so do not need to give any more concessions, or you are not the winner and no amount of additional concessions will win you the business.

The IPA’s Finance Business Group runs quarterly breakfast sessions on industry commercial issues including pricing and negotiation.

The IPA's Commercial Conference on July 6th addressed the issues of professional selling, strategic pricing and better negotiating skills.

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