Increasing Your Marketing Agency’s Revenues by Saying "No" to Clients
Monday, January 15th, 2007;
-- Andy Beal |
[The following is part of the continuing series of advice for marketing agencies. Andy Beal offers various business coaching services]
I know what you’re thinking. You’ve read the title of this article and you think Andy Beal must have lost his mind. How in the world can you increase the size of your marketing firm by actually saying “no” to a client? Isn’t that counter-productive, you’re asking? Surely you need to find ways to say “yes” to your clients, so you can get their business and grow your agency. Well, spare me ten minutes of your time, and I’ll show you why saying “no” to a client is often good for business.
Not All “Yeses” are Created Equal
In the past seven years of growing search marketing firms, I’ve said “yes” to clients more often than I can remember. When you’re growing a business — especially if cash-flow is tight — agreeing to the requests, or demands, of a client appears to be the only way you’ll ever get to the “big bucks”. While early in my career, I made the mistake of saying yes too many times, over the past couple of years, I’ve learned that saying “no” is more lucrative.
Saying “No” to Prospective Clients
How excited do you get when you’re negotiating that final contract with a prospective client and you’re accountant is willing you on to get the business in the door and on the books? Just like animals can smell fear, prospective clients can smell your desperation to get their business.
Unless you’ve done a phenomenal job of building the value of your agency’s services, its expertise, and benefits to the prospective client, the chances are high that you’ll be asked for a discount or some additional services for free before the client signs. Argh! You’re so close, you’ve made the investment in trying to win this account — your time on the phone, the pretty proposal, the face-to-face meetings — and if you’ll just reduce the price of the campaign from $5,000 a month to $3,500 a month, the client will sign today. What to do?
Well, here’s what most agencies do. They cave in. They say “yes” to the discount, or say “yes” to the extra workload, at the same fee. What they didn’t do, and what will surely come back to haunt them, is they didn’t say “no”.
Now, I’m not advocating being rude or arrogant at this stage. There’s the right way and the wrong way to say no, but you shouldn’t necessarily say yes either. You see, by simply agreeing to the clients demands, you’ve handicapped your business in two ways:
- You’ve reduced the perceived value of your service. By dropping your fee from $5,000 to $3,500 a month, you’ve planted the seed in the client’s mind that your original price was inflated — perhaps they’ll think you were trying to gouge them.
- You’ve established to the client that everything else is negotiable. I’ve lost track of the number of times I’ve reduced the price of a campaign and then found that client to be the most demanding and the most difficult to work with. Everything becomes negotiable from that point on — deliverable schedules, reports, results — the client now knows you’re likely inflating everything from pricing to timelines and will be on the lookout for opportunities to get more from you.
Hopefully, the above is resonating with you thus far. But, you’re probably asking, “How do I say no without losing the deal?” Let’s take a look.
Tactics for Saying “No” During Negotiations
The key to saying “no” at the negotiation stage is to give the client what they want, without devaluing your service. There are many ways to do this — certainly not enough room to discuss them all here — but here’s the most effective technique any agency can use.
When a client asks for a reduction in the price, don’t give it to them without actually reducing the deliverables of the service. Explain to them that you can reduce the price, but would not be able to effectively deliver the same level of service without finding a way to reduce the deliverables. Work with them, ask them what’s important to them, and ask them what they can do without. Perhaps you’ll reduce the number of hours spent link-building, or maybe you’ll reduce the number of pages you’ll create content for.
The key is to reduce the deliverables, so that you’ll:
- Keep your profit margins healthy, by not stretching your employees for less money.
- Demonstrate to the prospective clients you’re worth every penny you’re quoting. Honestly, unless you’re way off in pricing your service, most clients won’t suspect your pricing is too high, unless you flinch and show that you’re not convinced you’re worth the fees either.
- Discover if price is indeed a true “client objection” or not. Many times clients — including me — will test the waters and request a discount, just to see if you’ll give it to them. If you stand firm, I’ll promise you that at least half of the clients that ask for one, will still do business with you, if you say “no”.
Saying No to Existing Clients
I’d expected to spend the majority of this article discussing existing clients, but the advice here is very similar to that when negotiating with a new client. However, there are some extra nuances to look at.
If you’ve had the opportunity to say no and negotiate with your client during the contract process, you’ll likely find clients will be a lot easier to work with and less inclined to push you for “freebies”. But, as you may already know with your business, there are always situations where a client pushes for more than they paid for. Let’s take a look at a typical scenario involving a client asking for more deliverables, in a short timeframe — a double whammy, for any agency.
I’ve had many situations where a client comes to me and asks, for example, if we can provide extra pages of optimized content this month, as they’d really like to get a new category of products launched. How most agencies handle this — and I admit to doing this a few years back — is they immediately agree to the request (wanting to keep the client happy) and then hang-up the phone and stress how they’re actually going to get the job done in time. Suddenly, everyone’s getting into the office at 6:00 am, and eating pizza at their desk way beyond 8:00 pm, just to meet the client’s request. Poof! There goes your profit on that client for the month. Worse, you’ve just created an environment where the client thinks it’s no problem to drop last-minute requests on your lap, without consequence!
A “No” is Often Just a Qualifying “Yes”
The methods for handling this type of situation are as numerous as the ways the client can cause havoc at your firm, but here are just a few options for saying “no” and keeping the client happy and your agency’s revenues growing.
- Never agree or disagree to a client’s request immediately. While you may feel their urgency, telling them you need to check with your team first and will call them back in thirty minutes, gives you some breathing room to formulate your response and lets the client know that you did in fact have other things to do, when they called with their bombshell of a request.
- Next, check with your manager, team, and peers and see if you do actually have the time and personnel to fulfill the client’s request. Maybe you can get some employees to work late; perhaps your team is in a quiet period and has the time anyway. However, if they don’t have the time, saying yes to a client — and not delivering — is worse than simply saying “no”.
- When you go back to the client, you’re not going to give them a flat-out “no”. Instead, you’re going to say no, by giving them a qualifying “yes”. There’s a few ways to do that but, here’s the most effective:
- “I’ve checked with the team, and we can get the extra work done for you this week. However, we’ll need to scale back on the [enter other deliverable here] that we had hoped to get to you this week, in order to meet this request.” - See how easy that was? You’ve told the client you can get the work done, but they’ll have to agree to amend the other deliverables, so you can re-allocate the team’s hours. This allows you to meet the client’s request, without running around like headless chickens for the next few days. It’s a compromise most clients are happy to make.
- “I’ve checked with the team, and we can get the extra work done for you this week. I know you don’t want us to reduce our efforts on the remainder of the campaign, so I’ve spoken to my [manager, team lead, owner, etc] and were going to work some extra hours to meet your deadline. We’ve calculated the additional fee and it will only be an extra $XXX on this month’s retainer.” Here’s the option for a client that’s indicated they don’t want to reduce the workload elsewhere, but still need something extra done. You’ve agreed to their request, but demonstrated the value in doing this at such short notice. If the client truly does need your firm to provide the extra deliverables, they should have no problem in paying the additional fee.
Saying No Is Good For Business
The “tip of the iceberg” is an understatement when it comes to this advice on saying “no” to a client. While it can feel awkward and counter-intuitive, it’s a vital practice to have in place, if you want to grow your business and keep your profit margins. There are, of course, many times that you’ll say “yes” to a client — great customer service is crucial — but there’s a fine line between being flexible and accommodating a client’s request, and agreeing to everything a client demands, in a misguided attempt to keep them happy.
You’re running a business, you’re clients are running a business too. They’ll push you every chance they get, the trick is to know when to say “no” and push back, even if it’s just a little.
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January 15th, 2007 at 1:25 pm
Learning to say no was one of the best things I did for my biz, especially when starting out. The clients that talk you down will wear you down. I have often said we can do that but it will cost more since that is more work and that will seal the deal better than then lowering the price (if done right) cause it shows you know what you are doing, your pricing is set on actual work and not inflated, and that you mean business.
It is very empowering to say no as well.
January 15th, 2007 at 1:29 pm
This is such great advice (and I am so bad about this. Thank you.) Now I understand why Rand brought you in to give him business advice.
There is a great article on one of the topics that you alluded to but didn’t dwell on, i.e. doing a phenomenal job of building the value of your company’s service in the eyes of the customer. Full disclosure, this company used to be our customer but now they lecture us on the kinds of topics you addressed, and teach us how to make the customer understand our value through asking questions.
If I got this lecture 100 times a day it wouldn’t be often enough.
January 15th, 2007 at 1:33 pm
It can be scary to start saying “no”, but once you realize client’s respect you for that, it makes more sense.
Robbin, I have about a dozen topics to write about, so stay tuned.
Thanks for sharing the link.
January 15th, 2007 at 5:11 pm
This is one of the best advices that a new business can get!
I have actually set a high price for my services, which usually roots out most of the bargain seekers, but there are some who have tried to get me to lower my prices.
The best way I’ve found to deal with these clients is to offer them freebies from time to time - either a few hours at a reduced price or even for free, just don’t make this a habit. Still, this is only after the client has sent in a few payments and I know our business relationship is pretty solid; it never pays off to invest in projects that have no future.
Keep the advices coming - this knowledge is invaluable!
January 15th, 2007 at 7:00 pm
Andy,
Excellent post. I went through similar thought processes when I used to consult for an hourly rate. Everyone that wanted to hire me wanted me for as little as possible. At first I was eager for the gigs, but eventually decided they weren’t worth my time.
In many cases my fears of losing the contract were unfounded since once I said no and counter-offered, the client accepted and away we went. The take-away for me was that it’s just business and that I shouldn’t take it personally. Likewise, my fear of insulting the hirer were silly since they too understood that it is just business.
January 15th, 2007 at 7:49 pm
Wow! thanks Andy, this is a great advice for me that I’m just starting. Here in Mexico it’s so common to ask for discounts, but also it’s true that sometimes you must say no.
I think that the most important thing it’s to be confident that you’re giving excellent services to your clients, and that’s why the new clients are looking you.
January 15th, 2007 at 7:51 pm
This is a great post Andy.
Making the move from freelance to a full time gig is a scary step. I’m realizing that I’m running around like a crazy man more often than I’d like. This post gave me some great insight and brought me back down to reality. Thanks
January 16th, 2007 at 9:27 am
Brilliant post, Andy. Exactly the kind of procedure I’ve been trying to spread here! Sometimes I find my team taking the brunt of “deal clinchers” which means we are not generating profit - and then said clients go on to be very hard to work with from that point on!
January 16th, 2007 at 11:19 pm
I once had a potential client who said that my $150/hr rate was simply too expensive and I should charge half that. I quickly replied that I could charge $75/hr but the work would take twice as long.
He didn’t hire me… and as far as I know, he never got his project off the ground.
Regards,
Doug
February 9th, 2007 at 10:09 pm
nice article that fits in nicely with our own perspective on how to get the word out about interactive marketing. Maybe putting actual dollar amounts next to each suggestion is cheesy, but it shows how much he values the activities. We didn’t agree with everything (sugge
March 4th, 2007 at 12:07 am
I once had a potential client who said that my $150/hr rate was simply too expensive and I should charge half that. I quickly replied that I could charge $75/hr but the work would take twice as long.
March 19th, 2007 at 2:23 pm
[…] Andy Beal wrote the most wonderful post on the power of saying no. Soon after I read it, a client wrote me and asked if I would take a two day trip to another state to attend her all-day meeting. She offered to pay for my flight and hotel. Empowered by Andy, I wrote her back and gave her a couple of different ways we could do this (in person, by phone) and I attached prices to each. She didn’t answer that email but business went on as usual until she wrote again, asking for more free work. This one was an easier request (no travel required) but I didn’t want to stick her with another price tag and I didn’t want to do the work for free, so I just ignored it. The work was incredibly important and time-sensitive (I eventually learned), and if she hadn’t started the pattern of asking for free work, I would have stepped up to the plate immediately with a reasonable price. […]
March 27th, 2007 at 3:10 pm
The work was incredibly important and time-sensitive (I eventually learned),
April 12th, 2007 at 3:50 pm
In many cases my fears of losing the contract were unfounded since once I said no and counter-offered, the client accepted and away we went. The take-away for me was that it’s just business and that I shouldn’t take it personally. Likewise, my fear of insulting the hirer were silly since they too understood that it is just business.
April 12th, 2007 at 3:56 pm
same level of service without finding a way to reduce the deliverables. Work with them, ask them what’s important to them, and ask them what they can do without. Perhaps you’ll reduce the number of hours spent link-building, or maybe you’ll reduce the number of pages you’ll create content for.
April 16th, 2007 at 9:18 am
[…] Andy Beal wrote the most wonderful post on the power of saying no. Soon after I read it, a client wrote me and asked if I would take a two day trip to another state to attend her all-day meeting. She offered to pay for my flight and hotel. Empowered by Andy, I wrote her back and gave her a couple of different ways we could do this (in person, by phone) and I attached prices to each. She didn’t answer that email but business went on as usual until she wrote again, asking for more free work. This one was an easier request (no travel required) but I didn’t want to stick her with another price tag and I didn’t want to do the work for free, so I just ignored it. The work was incredibly important and time-sensitive (I eventually learned), and if she hadn’t started the pattern of asking for free work, I would have stepped up to the plate immediately with a reasonable price. […]
April 24th, 2007 at 10:27 pm
This one was an easier request (no travel required) but I didn’t want to stick her with another price tag and I didn’t want to do the work for free, so I just ignored it. The work was incredibly
April 27th, 2007 at 11:04 am
[…] There is plenty of debate about how much information you should give away for free. Talking purely from a reputation standpoint, the more quality advice you can give away the more you will build your reputation online. Businesses have been built based on giving away information. Take a look at these four posts from the “popular posts” at Marketing Pilgrim, each one is giving away information for free, and each new reader and new subscriber is one more relationship. Online reputation can be summed up as “build relationships”. […]
April 30th, 2007 at 1:41 pm
In many cases my fears of losing the contract were unfounded since once I said no and counter-offered, the client accepted and away we went. The take-away for me was that it’s just business and that I shouldn’t take it personally. Likewise, my fear of insulting the hirer were silly since they too understood that it is just business
April 30th, 2007 at 3:32 pm
It’s really works for me.Thanks dude.
May 1st, 2007 at 1:07 pm
In many cases my fears of losing the contract were unfounded since once I said no and counter-offered, the client accepted and away we went. The take-away for me was that it’s just business and that I shouldn’t take it personally. Likewise, my fear of insulting the hirer were silly since they too understood that it is just business.
December 12th, 2007 at 9:09 pm
[…] keep these different types of customers happy, you need to adapt your management style accordingly. Knowing when to say “no” to clients is a different […]
December 31st, 2007 at 3:56 pm
[…] of any business deal. Andy Beal had an excellent point (in a post that I frequently link to) that you shouldn’t reduce the price of your services without reducing your deliverables. It only hurts you to let them devalue your service and for you to take on more work for less […]
February 4th, 2008 at 8:08 pm
[…] Increasing Your Marketing Agency’s Revenues by Saying "No" to Clients - Andy Beal shows you why saying “no” to a client is often good for business. […]
May 13th, 2008 at 2:29 am
[…] Offering a discount immediately is just money out of your pocket. Although 59% of firms discounted their services an average of 12%, the industry leaders who opted not to discount their services saw this money go straight to their profits. “Not only are there major financial implications to discounting, the discounting discussion shifts the conversation from being about the value the firm provides to being about price. If price is an objection (and it often is) don’t jump straight to cutting price – cut the deliverables and promised outcomes first and the decrease in price will follow (without forfeiting project profitability),” according to report authors Mike Schultz and John Doerr. (See Andy’s previous advice on the dangers of discounting your fees). […]