Until you get punched in the face
It's nice to have a plan, but...
A recruitment leader wrote to me recently with a pricing challenge. It's a common problem for recruiters looking to do things differently, and getting it right is critical if you want to build a high value business.
In his own words:
Through the last couple of years of boom I led the business to switch to charging retained. The market has now shifted and job order numbers are lower, and I'm worried that my strong stance on this is hurting my billings.
Firstly, the shift away from contingent recruitment is a hugely valuable change in our industry. The blend of contingent and retained differs from agency to agency, but most recruiters I speak to are aware that they have the option to get buy-in from their clients at the start of the process.
From a value perspective, this tells me that we are more confident in justifying our service. The contingent model might be easier to sell, but it often results in clients not valuing the work we do for them.
However, when the market tightens it can feel harder to win retained deals. The dilemma is whether to stand firm and continue to require an upfront fee but risk losing business, or to slip back to the traditional payment-on-success model in the hope of picking up more work.
There are no easy answers, I'm afraid.
There are various suggestions around your tactics when faced with this kind of dilemma. For example you might reduce the amount you charge upfront, or lower your fees to reward those who pay you a retainer. You can run the numbers to compare retained fill rates against contingent to predict the higher revenue option. But these are sticking-plaster suggestions for a broken leg.
The limited effect of tactical changes shows why I spend so much time helping agencies build the foundations of their pricing strategy. In my view, you need to build a strategy that will guide you through every type of market condition.
Once you have a strategy that gives you confidence in your value, you are then in a position to decide on the tactics to fit the market. This allows you to adapt quickly and confidently when job flow changes, but it also informs your approach when you expand into new sectors or regions.
The strategy remains the same, the tactics fit the market.
If you are looking for help in building a strong strategy that will guide your pricing - including retainers, negotiation, and added value services - then simply reply to this email with the word 'Strategy' and I will talk you through the next steps.
Jon
P.S. I'm interested to hear whether the format of me answering your pricing challenges is a valuable one for you.
Please take a moment to let me know your thoughts in this poll: