The price of loyalty
To discount, or not to discount
Q: You have a client that keeps coming back to you. Should you charge them more, or less?
This is a conversation I had with four recruitment leaders over lunch recently, and we didn’t come to an agreement.
On the one hand, you appreciate your client’s loyalty so offering a lower fee makes sense. You want to encourage clients to keep coming back to you, and reducing your rate is a simple, visible way to reward them for returning.
You also save money when you get repeat business, because you don’t save on carrying out additional BD. So passing on some of those savings seems like a fair thing to do.
On the other hand, your client is coming back to you for a reason. They value what you do. Recruitment isn’t easy, and you helped them add a strong team member to their business. You’ve demonstrated your value, and they’re demonstrating that they value you by asking you to work with them again, so you’re in a good position to raise your fees.
Related to this, you might have reduced your fees to get your foot in the door with a new client. Now you’ve proved yourself, you have the evidence to justify why this new clients should be paying you what you should have been paid in the first place.
The risk of raising your prices with a repeat client is finding out that they didn’t value you as much as you thought, and they go to a cheaper recruiter for their next role. Then again, if you always follow this line of thinking then you’ll end up charging unprofitable rates…
My reason for sharing this discussion was not to give you the answer - there is no one right answer - but to show how complicated pricing decisions can be.
The problem many recruitment agencies have is that they try to avoid the decision completely. But sticking your head in the sand just leads to inconsistency and confusion.
The good news is that a clear pricing strategy will give you and your team the clarity to find the right answers. Ones that work for you, and work for your clients. Which means winning repeat business at rates that make sense to everyone.
If you want an expert view on how your pricing strategy looks right now, and some pointers on what you could do to improve it, simply reply to this email and I’ll explain how I can help you.
Jon
P.S. Many recruitment agencies give their consultants the autonomy to make their own decisions on how to set prices for their clients. While I love the freedom consultants get to ‘run their own desk like a business’, when it comes to pricing you can quickly lose strategic direction and end up with both consultants and clients confused about what the ‘right’ price is.
I also see agencies who use this approach leaving money on the table in many of their deals. And when you add up every missed opportunity to charge more, it can often be the difference between a highly profitable business and one that is struggling to break even.
In other words, it pays to have a clear pricing strategy for your business.
If you want an expert view on how your pricing strategy looks right now, and some pointers on what you could do to improve it, simply reply to this email and I’ll explain how I can help you.