How to Respond to: “But Your Competitors Are Cheaper”
“I deal with recruiters who charge half of what you charge. Why should I deal with you at your fee of thirty percent?”
Hey, that’s a real good point, I thought to myself. I would probably ask the same question if I were in my prospective client’s shoes. He was a sharp and intelligent seasoned professional who has seen nearly every type of hiring scenario and has dealt with scores of recruiters over the last twenty years. What would be a logical phrase that I could give to this prospect that could turn him around and actually get him to willingly pay me a higher fee? Should I just tell him that I present better candidates and hope he buys it? Or should I just give in and go lower on the fee?
“That’s a good point, Joe. If I were you I would ask that exact same question.” I said it with empathy so that he felt that I really listened to his objection. “Let me share something with you about our industry that you may not have ever considered before.”
I’m listening,” he said. I think he was shocked that I didn’t just go ahead and capitulate to his forthright and serious response. I knew that I had his attention. He knew that I knew that I had his attention. I knew that he knew that I knew that I had his attention. It was time to go for it.
“Joe, what percentage do you work at with these other firms?” I asked.
“Twenty, sometimes fifteen percent.”
“Joe, do you think that you are the only client of these search firms?” I asked. Sure, loaded question.
“No, of course not,” he responded, probably rolling his eyes and thinking, ’sure, loaded question.’
“Well the odds are high that these firms who you work with at fifteen and twenty percent have other clients who are willing to pay between twenty-five and thirty percent for top talent. Who do you think sees the best candidates first, you (pause for effect) or those other companies willing to pay a higher fee?”
“I see your point,” he said. It was a logical argument, and it made sense to him.
The next time you have a client who discusses the question of fees, use this ‘contrast principle’ argument to help them get a visual image of their competitors hiring better people but paying a premium fee for it. Continue in the conversation to ask more questions about their organization, asking things like how important it is to hire top talent and finding other emotionally-related issues which have the propensity to propel the client forward.
Remember, people make decisions based on emotions, not intellect. If you can strike the emotional chord of what would compel the client to go forward, you have just increased the probabilities of them paying a higher fee for it.
Within this little phrase you are (1) using the contrast principle to compare the fact that he does have competitors who are willing to pay full fees. (2) This is also based on the principle of ’social proof’. If others have done it, so should he. Even further, you are (3) using the principle of scarcity to motivate him to move forward with a higher fee, showing him that there is a limited supply of top talent and that there is always hiring competition for the best of the best within his market. People move when a supply of something is scarce and when that supply has a higher perceived value.
Even if your client doesn’t go forward with the higher fee argument, at least he or she will respect you and the value of what you do if you show them that you respect yourself by explaining in a logical way how it benefits them to pay a higher fee. Remember that people do only what is in their own personal interest. Show the prospective client why it is in their best interests to pay you a higher fee and how that will benefit them on a personal and an emotional level.
If you put up a little bit of a verbal struggle with the fee conversation and don’t get them to go up in the fee, then you can at least negotiate for an increased response time or better payment terms if you can’t get anything else from that conversation. (“Okay, then we’ll work at that fee, but as soon as I present a candidate to you, I need for you to schedule the interview right away and give me immediate feedback after the interview.”) Try this logical progression of conversation the next time a client balks at your fee, and you’ll be amazed at how easier it is to get higher margins with that one little phrase.
Bonus tip: If you ever do have to make a concession on a fee, always find a justification for it. (“I just got a big retainer and I really don’t have the time to present this candidate to any other companies so I can justify working with you on this particular placement at that fee. But if I work on other searches for your company, then I want you and I to agree that I may want to talk about working on them at a higher fee.”)
Double Bonus tip: Remember, if they balk at your fees, it means that they’ve read Roger Dawson’s book Secrets of Power Negotiation and are using the ‘flinch technique’ on you. I’ve met with Roger several times at National Speakers Association meetings, and each time I see him I tell him that I built my entire recruiting desk on his fabulous book. If you haven’t read it, you need to get it today.
- Scott Love
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Copyright © 2011 Scott Love