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“We lost on fee”

How many times have you heard people say this about proposals or pitches they didn’t win? How many times have you said it? And is it really true?

 

It’s what the client told me when I asked for feedback

 

Is this the real reason you lost?

Not necessarily. You may have been asked to pitch when you had no real chance of winning. Sometimes the client already knows who they want to appoint, but they need another couple of applicants so that they; (a) comply with their company regulations (b) demonstrate that they have assessed the market, and (c) use the fees from the other submissions to beat their preferred choice down on their fee.

It’s an easy fob off. This feedback works well for clients because they are not obligated to share information on your competitors’ fee levels. It’s a dangerous position to be in because you are left thinking your fees are too high and you need to be more competitive next time.

 

What’s usually the reason?

Whilst the above is a real possibility, the more common reason you lost a job on fee is because neither you nor your competitors offered any point of differentiation other than the price.

9 out of 10 times a client chooses the cheaper option is because:

  1. No one offers anything different that was of value.
  2. No one explains how their method of solution will drive better results.
  3. Those who do offer something different, offer something the client doesn’t want or need and so they are not prepared to pay more for it.

 

Win on value, not fee

Unless the scoring is weighted more heavily on pricing, the client will make their selection based on:

  1. Who they like – and they already know, trust and have developed a relationship with before pitching.
  2. Who can deliver – and has the strongest track record of similar success.
  3. Who differentiates – and offers something that will get better results.

If the client wants you and you tick the criteria above, but your price is way out, they won’t reject you for this. They will negotiate.

 

Explain your value

Most people outline their fee and the terms that go with them, but rarely how they arrived at that figure. Explain why your fee is better value for money than your competitors’. I use the following example to explain this to my clients:

Your competitor’s fee is £100 and they prove they can save or make the client £1000.

Your fee is £500, but you prove you can save or make them £5000. Which one would you rather go with?

 

Don’t discount

If the client comes back to you to negotiate on price, they are interested. They want to work with you. So why are you so quick to drop your fee? Because your competitor came in lower? The same competitor your client doesn’t want? Agreeing to reduce your fee sends out a very quick message that you overpriced in the first place. Instead of offering a reduction, there are a number of credible things you can offer instead:

  1. Put a percentage at risk against your agreed targets and performance levels.
  2. Take something away, reallocate resource, or adjust timings.
  3. Ask for more work as part of the agreement.

 

Give options

Instead of offering one fee quote, outline a number of options for the client. This gives them the freedom of choice. And never round your numbers up or down. £10,000 looks like it has been plucked out of thin air. £9,700 comes across as considered and reflects your best possible price, reducing the desire to negotiate.

The fee is the pivotal element in winning work, but it doesn’t mean you have to be the cheapest to get it. Explain why you are worth what you are charging, how you arrived at that figure, and how you will drive better results for your client.

1 Comment
  1. An excellent article – this topic is the main reason for disillusionment in sales teams. I’ve seen it so many times – instead of reshaping the way they approach the market, heads hang down and the team starts the next bid with less energy and no belief. Thinking you’re ‘too expensive’ makes future bidding pointless.

    Your point about clients buying organisations they like, is well made. Bidding starts long before the opportunity arrives. If you pick it up when it comes to market, you’re generally too late.

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