Pricing effectively has a huge impact on the value of your business. For a typical recruitment agency, a 1% improvement in price creates a 10% increase in profit.
By adapting strategies from other industries, you can confidently set your prices in a way that communicates the value you create and encourages customers to pay more.
Leaving Money on the Table
There are three ways recruiters tend to leave money on the table. First, most take a “one price fits all” approach to pricing their service. In reality, there’s no such thing as an average customer, so hiring managers are either going to think your price is too high (and push you down) or too low (and you miss out on income).
Second, recruiters fall into the trap of assuming their customers appreciate the value they provide. In reality, hiring managers don’t realize the work that goes into the recruitment process — so they expect the price to be lower than it is.
Third, B2B customers have been conditioned to always ask for a discount, even if they are happy with the price. Recruiters rarely have the tools to push back effectively — so the price drops further.
How can recruiters overcome this? Here are three pricing strategies from other industries that could improve the value of your business.
1. Understand what your customers value. Ask hiring managers what they value from recruiters and you’ll get a range of answers: more CVs; market expertise; a cheerleader promoting their company to candidates; maybe even someone to blame if it all goes wrong.
If you can understand what a customer values, you can set your price effectively. On the other hand, if you pitch your “expert consultancy” price to a “send me CVs” customer then you’ll both be disappointed.
By moving from an “average” customer to understanding the value you add to different hiring managers, you will be able to develop more insightful — and profitable — relationships.
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2. Talk about value. “How much is it?”
The four words every recruiter dreads. The minute you say a price, your customer switches to negotiation mode. With price dominating the meeting, you don’t get the chance to talk about the value you offer your customers.
This is why many B2B companies now offer a range of packages. The conversation transforms from “how low?” to “what do I need?”.
Cost-focused buyers can choose a cheaper package and avoid paying for services that they don’t value, while customers seeking high value services can see they need to pay more.
Your consultant’s role in the meeting is transformed from a powerless negotiator to an expert advisor who guides the customer to the package that suits them.
3. Define your discounts. You want your consultants talking to decision makers. When it comes to negotiation however, this puts you at a disadvantage. A senior manager is going to have experience in winning big discounts from their suppliers.
You need to give your consultants a framework to help them with discounts: where to start, when to stop, what to get in return, and when to walk away.
In the same way you’ve identified what your customers value from you, you need to define what you value from them — and what it’s worth to you. For example, you might decide that exclusivity on a role is worth a 20 percent discount.
By defining your discounts, you give your consultants the confidence to win business at a price that works for them, for your customers, and for your profits.
Keep the change
By embedding an effective pricing strategy within your processes and systems, you increase the value of your business for years to come.
