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Business Unplugged™
This blog features Carol Roth's tough love on business and entrepreneurship, as well as insights from Carol's community of contributors.

Should You Negotiate for Creative Services?

Written By: Mark E. Goodman | Comments Off on Should You Negotiate for Creative Services?

SketchingBuying creative services can be difficult. Obviously, a painting costs more than the canvas and paint that was used. Even if you added in the hours, who is to say that a great painting takes 1,000 times more hours than an ordinary one? In the digital world, there are a number of approaches that can yield the same output. In the end, you buy the output.  

I was recently asked by one of my relatives who runs a medical services company how much he should pay for digital and creative services. He commented that the digital services provider didn’t have to pay for a facility, laboratories and extensive staff. He observed that the company seemed to have very little overhead. Furthermore, he stated that he knew what he wanted, so it shouldn’t cost very much at all.

(In his assessment of the provider, he did not mention the cost of the provider’s formal training – or years of work experience he would benefit from.)

When my relative got the quote, it was close to 50% higher than he had expected. So, he described what he wanted and asked me for some tactics to negotiate a lower price. (I have a policy of never working for relatives, so it was easy to give an answer.)  

The first thing that I pointed out was that the digital provider appeared to understand the project. The provider also had experience working with business owners like him. While the price he was quoted was on the high side of what I might expect, it was in the ballpark.

My relative’s position was that he should go back and ask for a lower price. While this can work, it also can backfire.  

I suggested three possible paths:

  • Accept the price quoted. (Not what my relative wanted to hear.)  I told my relative that if he insisted on paying two thirds of the price, then he might get two thirds of the effort. I suggested that he tell the provider that he thought the price was high. By accepting the higher price, my relative was going to be expecting a creative experience that would clearly differentiate his company from the competition. Paying “top dollar” could reinforce the superior positioning that he had created for his medical services company.
  • Ask the supplier to detail the specific costs. Once the detail was created, then my relative could negotiate item by item. Perhaps with better clarity on both sides, a more favorable price could be agreed upon. I did warn my relative, however, that the more that he commits to doing, the more responsibility he may have for cost overruns. If a task takes more effort, the provider will charge more.
  • Say he is willing to pay two thirds of the quote. In this this scenario, the provider may or may not take the offer. If the provider takes the offer, the outcome presents several possible risks. First, for a lower the price, my relative may end up with a so-so job. If he is not satisfied, the provider may just say, “I told you it was going to cost more.” In this situation, does he accept it and pay – or walk?

We all have horror stories of cost overruns and problematic deals. As a service provider, do you charge more when your client says, “I don’t like it”? When queried about what they don’t like they may reply, “I just don’t like it.”

What is your recourse when your provider says halfway through the job, “You have used up all of the hours that I budgeted for this project”?

My advice to my relative was to take the price that was quoted – or look for another provider. If he was stuck on a specific dollar amount, he should tell the next provider what his budget is, and then see what they could deliver for that investment.

On the other hand, an additional quote or two may validate that the job is realistically more expensive than my relative originally anticipated.

What do you think he should do? Pay the quoted price? Negotiate?

Article written by
Mark Goodman is the President & CEO of e-Conversation Solutions. He is also past workshop chair at SCORE Chicago. Prior to founding e-Conversation, Mark held numerous positions as a technology executive, including Director of Business Development at Motorola, where he was the first business manager in the cell phone group. In addition to Motorola, Mark was an executive for a Silicon Valley company and a film buyer for General Cinema Theatres. Mark holds an MBA from Boston University and an MA in radio/TV/film from Northwestern University.