I recently heard two pitching/procurement stories in two days, each from a different agency president in a different market, and each with a different outcome.
In the first story, the president of a large ad agency (I’ll call him agency president #1) told me about a significant, highly coveted pitch his firm had “nailed.” After it appeared they were the ordained firm they then had to meet with procurement. Procurement delivered the bad news. “If you want the business you’ll have to accept that we’re not paying you for any work you’ve done to date.” (The agency had already done rounds of revisions and had understood they would be paid if they won.) The agency was then told the fees on offer were one third of what they had proposed. But it got worse. “There’s no negotiating,” the procurement person explained while showing the agency president what he said were the lower fees proposed by their competitors. “You can take it or leave it.”
“Of course, we had to take it,” he explained to me.
The next day I met with another agency president (let’s call him #2)–this time of a smaller but still substantial performance marketing firm who didn’t have too much experience in dealing with procurement. He told me about his first time. His agency was convinced by a sizable client to do a small digital pilot project on spec with the lure of winning a $500,000 annual retainer. Their pilot performed well and they were awarded the business. Then they too were told they had to meet with procurement who said, “We’re not paying you $500k. The fees on offer are $300k. Take it or leave it.” Indignant, agency president #2 walked away. A few days later the client came back and gave them the business on the original terms–a $500k annual retainer. That was two years ago, president #2 told me, and the account has grown significantly since. “They pay us fairly and they hold us to really high standards,” he said. “It’s how we like it.”
I told him the contrasting story I had heard the day before and I remarked that if he had caved on that first experience instead of walking away he would have begun to hardwire the belief that “Of course, we had to take it.”
Do You Really Have to Take It?
Why do agencies get themselves into these situations where they feel they have to take work on onerous terms, where they have to put up with procurement's powerplay moves and where they have no power to affect price? I’ll explain below a few of the things president #1 could have done differently before, during and after the selection process to ensure a better outcome, but let’s go back to agency president #2 who walked away, only to get the account on the originally agreed upon terms. I remarked to him that if it were me in that moment I would have wanted to know which of the two people on the client side had lied to me. Was it the marketing exec who said the budget was $500k, or the procurement person who said it was $300K? (Of course it was procurement. Procurement is one of the only professions where it is universally taught that it’s okay to lie.) But I would have asked each individual to their face, “Which one of you lied to me?”
These are the direct conversations we need to be having. Why does this behaviour get a free pass? Would you accept such behaviour from your team members, partners, vendors or children? Why is it okay to accept such lies and strong-arm tactics from a client–someone you’re proposing to “partner” with? Is that how partners treat each other?
It Happens to Me, Too
I spend a lot of time delivering workshops on these principles to agency owners and executives. After one such event, the finance department of the organizing body ignored their contractually-agreed obligation to pay the final installment of my workshop fee. On inquiry, we were told, “We have a payment run on [11 days away] – I will include the invoice as a proposal for payment.”
So, a well-intentioned organization that wants its members to change how they sell has its own embedded bias against any other organization selling them anything. The goodwill between the buyer and seller gets eroded by established procurement processes that seek to optimize financial efficiency.
A tenet of systems thinking is any attempt to optimize a subsystem will have a sub-optimizing effect on the greater system. A finance department allowed to operate with too much independence will see pushing average supplier terms from 45 days to 60 days as a victory. A procurement department that cuts its marketing company’s fees by 40% thinks they’ve won. Both of these “wins” have a negative effect on the quality of what it is they are buying and the relationship between the two organizations, but these departments are rarely held accountable for the costly impairment to the greater system–the client company.
You’ve Been Chosen
When such practices are employed, somebody has to be the adult in the room. Somebody has to call people out on poor behaviour or deleterious practices–even if those practices are codified in policy. Ideally, that someone is the client, but don’t hold your breath, it’s almost always going to have to be you.
If you want financial success then you are going to have to accept that these conversations are almost always going to fall to you, and you have a responsibility—to everyone on both sides of the table—to do the right thing and speak up when nobody else will. The alternative is you resign yourself to a low-margin career of “having to take it.”
We got paid within 60 minutes of me calling out bad behaviour. Agency president #2 got his originally-agreed upon terms by walking away. Let’s explore what agency president #1 could have done instead of just taking it.
Alternatives to “Taking It”
There are many things agency president #1 and his team could have done differently. Setting aside some of the more strident Win Without Pitching approaches that would see the firm trying to fully derail the pitch, they could have:
- Asked the client to clarify the role of procurement before they agreed to the pitch. And if they were at all concerned about procurement’s role or tactics they could have asked for a meeting before agreeing to participate.
- Asked marketing or senior leaders from outside of procurement to sit in on that meeting.
- Established a minimum fee level in advance.
- Asked the client to state the budget rather than just guess.
- Stopped at the moment in the pitch where they knew they had nailed it and negotiated terms for continuing.
- Employed an outside expert negotiator to deal with procurement.
- Viewed procurement’s take-it-or-leave it move as the bluff it likely was and negotiate alternatives, or
- Walked away, like agency president #2
None of the above are Win Without Pitching judo moves that require any sort of skilled practice to pull off, they’re just common sense approaches available to anyone who is ready to accept the responsibility of being the adult in the room. You can do this.
PS: A Final Word on President #1’s Difficult Position
Agency president #2 found it easy to walk away from a bad deal because he is the majority owner of the firm and an entrepreneur who has a strong sense of being able to control his and his firm’s future. Agency president #1 is in a different boat. He has to report to global, who reports to the holding company, whose CEO reports to shareholders. And these shareholders are increasingly unhappy. In such an environment the pressure not to lose is immense.
For agency president #1 to push back, the battle he would have to fight with the client is nothing compared to the internal battle he would have to wage. In a multi-layered firm like his, for every brave soul willing to push back and have the adult conversation, there are many more who would prefer not to rock the boat, even if it is exactly what’s required to save the boat from sinking.
I guess my question is, who are you? Are you the progressive force for change in your agency, having the adult conversations and leading your entire team by your example, or are you the one signalling to others that “we just have to take it”?