(This post in another in our series of Rainmaking Problems. We invite your comments on this problem and would also welcome any problems you would like to s to get comments form other readers.)

I recently met with a client adjusting from the heady days of a boom economy to the current bust. Several of its professionals argued that they hadn’t been in a sellers’ market. Competition for large projects was always tough, they said, and though they had won a lot, they had lost some, too. True enough, but their firm’s major competitors had grown at rates over 20 percent per year and the firm, itself, faster than that, while maintaining or increasing prices. Sounds like a sellers’ market to me.

There is good reason to clarify this point, because recognizing when one is tipping from a sellers’ to a buyers’ market or vice verssus has important implications for many professional firms. That’s because the price of many professional services is quite elastic with demand. Boom turns to bust quite suddenly (see my post, Selling Professional Services in a Downturn, for an explanation of why), and you have to drop prices quickly, if you want to keep winning work. The market teaches this quite effectively, when too many firms compete for too few projects or assignments and clients play them off against each other to get the best deal.

When the tide turns to boom again, clients aren’t nearly so quick to help you see that you can raise your rates. This means that prices tend to go up more slowly in good times than they go down in bad. The firm which recognizes when it can charge its clients more generates much higher profits than its competitors.

My question is, how will we know when this downturn is over and we can begin to push up rates?

Maurie Fulton, a rainmaker who gave me my first job in consulting, knew his field cold and, just as important, knew his clients.  Through years of negotiating fees, he was familiar with every ploy that clients would use to get our fees down and had effective counter ploys for all of them.  Whenever a prospective client would try a ploy, he would real off his standard response with such grace and confidence that the clients would usually move on to another subject without further comment.  Here are a few client ploys and Maurie’s counters:
 

Client Ploy: Someone Else is Cheaper
Counter Ploy: The Butter Story
 

On hearing our fee, the client would say that they were talking with one of our competitors who would do the work for less.  “So, why don’t you use them?” Maurie would ask, sensing this was just a ploy.  Not expecting this question, the client would say that the competitor couldn’t start as quickly or didn’t have quite as much experience as we did, and Maurie would respond with his butter story.  “It reminds me of the woman who told the grocer that the store down the street sold butter for half his price.  ‘So, why not by it from them?’ countered the grocer.  ‘Because he’s out of butter,’ said the woman. To which the grocer responded, ‘Lady, when I’m out of butter I sell it for half off, too.’”
 

Client Ploy: This Could be the Beginning of a Long   Relationship
Counter Ploy: That’s What I’m Afraid Of
 

The client would suggest that this would be the first of many projects he would give us, if we just gave him a break on our price.  And with a twinkle in his eye, Maurie would respond, “You mean that this could be the beginning of a long relationship? Yes, a long and unprofitable one.”

Client Ploy: Existing Data Makes You Cheap
Counter: Let Me Help You Find Someone Else  

On seeing our impressive array of proprietary information, the client would say that with all that data on file, the cost of our service would be low.  Maurie would smile and respond, “If you wish I can introduce you to several people who are much less expensive than we are, who don’t have any of this data.”

These kinds of statements by clients should be taken for what they are, offhanded attempts to wheedle your prices down.  Remain calm and try one of Maurie’s responses.  They almost always work.

Readers,do any of you have effective responses to common negotiating ploys by clients.  If so, would you share one?