When I’m not wearing my marketing/communications hat for NPAworldwide, I’m hard at work planning and executing our in-person meetings around the world. There is an interesting parallel between hotels and recruiters as it pertains to room rates and fee integrity. Hotel room pricing is very much subject to the laws of supply and demand. When supply is low and demand is high, hotel rooms become more expensive. Conversely, when supply is high while demand is low, hotel rooms typically become more affordable. However, a few economic downturns ago, hotel rooms got MUCH more affordable – hotels offered fire-sale rates in a desperate attempt to fill rooms and bring in lucrative meetings business.
Eventually, the market turned around, but you know what? Room rates did NOT rebound to their pre-recession levels. For YEARS. That’s right – it took YEARS for room rates to recover, even though demand was high. It seems that consumers who had been used to paying bargain-basement prices could not be convinced that the hotel rooms were “worth” more. Hotels learned from this and now operate from a “rate integrity” viewpoint – so as meeting planners, we might see additional concessions during a slow economy, but we are NOT seeing huge discounts on room rates. And that’s where fee integrity comes in.
During a slow economy, your clients will be in money-saving mode. One of the first things they are likely to do is ask for discounts on recruitment fees. I strongly believe recruiters need to tread VERY carefully here. If you have been charging 25% or 30% fees to your clients, and all of a sudden offer to provide the exact same service for 18% or 20%, it is extremely difficult to recover those higher fees when the market improves. You will be stuck discussing price instead of value. Clients will not believe that your service should “cost” 25% or 30% if you were willing to sell it for a much lower price in the recent past. Much better if you can adopt a fee integrity mindset in the form of offering additional (or different) concessions while maintaining your fee structure. What could that look like? Here are some ideas:
- Try a flat discount of $1,000 or $2,000 dollars (or some other amount that makes sense for you)
- Even better, tie that discount to shorter payment terms – this has the added benefit of giving you better cash flow AND fewer receivables to manage
- Consider unbundling your services to allow clients to select an a la carte package at a lower price point
- If you feel you MUST offer a significant percentage reduction, remove some services so that you are not offering 100% of your normal service for 75% or 80% (or less) of your normal fee
- Offer your clients the option to pay in installments. Services like APositive and HirePay (we have relationships with both) pay the recruiter upfront for a nominal fee and then collect installment payments from the client.
This is a uniquely challenging time for all businesses and business owners. Recruitment firm owners will need to be creative and flexible to maintain strong client relationships. That includes creativity and flexibility in pricing. Deeply-discounted fees may help you in the short-term but are likely to be damaging to you (and the profession as a whole) in the long-term. Listen to your clients, understand their needs, and work on creative solutions that allow you to maintain your fee integrity.