It doesn’t matter if they are selling paper or pixels. Every salesperson says the same thing. Personally, I have heard it many times and now I am hearing it from other people too. They all say prices are too high. It’s their knee jerk response to new work. This conversation kicks in when the people selling the work get their hands on the estimate for doing the work. Sales or account service then call a meeting to discuss, but what they are really doing is challenging the estimate because they feel the cost is too high. That’s if you’re lucky. Sometimes they adjust the numbers on their own.
From an earlier post you may be familiar with this story, but I didn’t fully disclose how bad the circumstances were. My team was about halfway through a small phase of a large project that had a solid estimate in place. Out of the blue, account service started freaking out. At a status meeting we were being called out for causing the project to run over budget. We shouldn’t have been anywhere close. After some investigation it was learned sales and account service adjusted our estimate without telling us. Only because they had the audacity to point fingers did we find out. The sad thing is it was just one of many times the estimate was adjusted. Later on we discovered our agency had billed around $600,000 for over $1,000,000 of work. The girl that made the mistake of calling us out was let go. Her boss who actually made the adjustment remains employed.
What happens to a client that gets free work? They expect free work. One of the first rules of negotiating is to never give something up without getting something in return. The client asked and we gave. We took nothing in return and so that’s what we ended up with. After that agency tried to fix the error of their ways and enforce some level of profitability, the client pulled the project and handed it off to their internal IT team. I am sure that turned out to be a rude awakening for the client, but for that agency, it was long drawn out process that cost $400,000 and made enemies out of its coworkers.
A salesperson’s job is to show value. If they can’t do that one thing, I don’t know what purpose they serve. Stroll into any automotive showroom and a salesperson will start walking you through the features of the car you’re interested in. It’s preemptive price justification. Infomercials do a good job at this as well. Regardless if the customer is paying just $19.95 or an affordable $19,500.00, there is healthy amount of value statements and enthusiasm built into the pitch.
I respect good salesmen. They take the time to understand the work they are selling. They know the product inside and out. They understand exactly how it will benefit their clients and how to go about communicating that. Certainly, they know a pitch has to be informative and entertaining. It’s the art of showing value.
When salesmen are bad it sometimes comes from laziness, but other times it is gullibility or the lack of a backbone. I have had enough client interaction to know how they can push. You learn anything not in writing doesn’t exist. If you’ve been in business long enough, client requests go something like this. If you do this for me now, I will give you more work later. Or, this project will get you great exposure. Well, the promise of exposure is not worth a check in the bank. The promise for more work later on is fine if they want to sign a contract. If they don’t put it in writing, we call that a lie despite it being intentional or not.
I can think of a client I also knew personally. I used to do software development for him. No matter what he was doing, he was negotiating price. Always looking for an angle on how to get something for free, didn’t matter if it was fundamentally unethical. The way he saw it, if you could exploit the system, there was a problem with the system. He was just being smart. He may not have been honest all the time, but he certainly wasn’t breaking any laws.
So yes, clients push to get the best prices for products and services, big surprise. Sometimes they cross a line. Sometimes they don’t. Like any relationships, they might just keep pushing to see how far they can take it. If you don’t know how to effectively stand your ground, you’ll get bullied. There are a lot of industries that wrestle with this.
Advertising agencies are often asked to develop ideas first to see if clients want to buy. Could there be a worse way to do business? Your agency spends weeks on a pitch competing against four or more other agencies. The company you’re doing work for reviews all the pitches to select one agency that gets paid. Hundreds of thousands of dollars in resources are just wasted if you don’t get the win. It’s just another way giving away free work can be financially devastating.
We all do things at times without direct compensation. We invest thousands at college in hopes of landing a job that is more financially fit than flipping burgers. Maybe it’s a personal relationship that has you doing favors for someone who will return them at a later date. Too often in business though, someone tries to confuse indirect compensation with what they are really offering, which is nothing.
If you have a set bill rate and there is a set amount of time the work will take, accepting anything less is just giving it away. When offered less money, offer less work. If the sales team has a problem, you need to put your foot down. The client has a problem? Now, it’s a negotiation. Once forced to accept a concession, call it out and get something in return. Regardless of the situation never sell your work for free.
I will leave you with a video that sums up the experience well:
Digital Interaction 
To quote Buffett: “Price is what you pay. Value is what you get.”
I really wish people understood the value of long term relationships in business. There’s more to it than just money. Skimming/treating business partners badly isn’t certainly a good way to build success on the long run. Eventually it’s going to bite back.
Nice video btw!
Being good at business is hard. The majority of people are incapable of it.
That same majority of people occupy 90% of all business jobs.
Yup, I used to work in a consulting company and I have seen this happen all too many times.
This is especially rampant in off-shoring because both salesmen and clients think that the only factor to compete is the cost.
This is a fallacy – like everywhere else there are good off-shoring companies and bad off-shoring companies and the good ones don’t compete on the cost alone…
Agency of record comes to mind after reading this post – the idea is the agency becomes a partner to the business, understands their business model and how they create revenue on a deeper level and then the creative agency can bring better and more on target ideas to the table every time that really drive revenue for the company. I worked at an international ad firm and did not have one agency of record account in four years that I knew of. the ones that were agency of record stopped working exclusively with us after year one and hired multiple agencies.
Mr. Nance do you work where I do? Or do you have a degree in mind reading? This idea of “Free Work for Sale” must be an industry standard.
I constantly here about the word exposure or “it’s good for business.” Sorry, but the last time I checked getting our paychecks late or violating ERISA doesn’t exactly equate to “good business.”
It just seems with the sluggish economy, over zealous executives, and clients who want more bang for their buck free work is expected and most of the time demanded.
If only they would understand the time, money, and effort it still takes to produce so-called “Free Work.”