Years ago I got a call from a client with whom we had a long-term project-based relationship.
We had submitted some creative work for a project along with a fee proposal. Our fee was in line with previous work, and we knew from our benchmarking alongside other creative agencies that whilst we were not the cheapest, we certainly offered great value. We had always scored highly against the client's quality scorecards.
My client contact told me that his procurement director had been reviewing marketing costs and was all over him like a cheap suit; he was pushing for procurement to get involved in our negotiations and claiming that he could leverage a 15% reduction in our prices. My contact said that he thought not, but he then said to me, "Alan, you need to give me a 5% reduction in the fee otherwise procurement will take over. Believe me you don't want to mess with them!"
I remembered this conversation last night when I heard the news that David Cameron had been embarrassingly defeated in the House of Commons in a vote on his position in forthcoming European negotiations. The coalition government's recommendation was to hold firm on the "real terms" amount that the UK hands over to Brussels; allowing for inflation that would amount to a 2% increase.
This fairly ambitious position was rejected however, with many MPs on the "euro-sceptic" wing of the tory party demanding a reduction in the UK's contribution and further suggesting that Europe gets its house in order on spending.
The vote is not binding on the government, but No 10 sources made it clear that the prime minister would lay down a "red line" at the EU summit, which opens on 22 November, to reject a planned 5% increase in the budget to ensure that it rises only in line with inflation.
Political humiliation notwithstanding (if that indeed is what it was), in many respects the vote may have strengthened Cameron's hand in the upcoming talks with Angela Merkel. Whilst Merkel may have lots of other issues to resolve, including the survival and future health of the Euro, the majority position in the House of Commons clarifies that any increase will be tough to get, and will certainly require major concessions to achieve.
Structuring expectations for negotiations happens throughout the entire process. You are certainly able to control much if not all of how the other side see your position. Take advantage of circumstances when you can.
Incidentally I gave the client the 5%. But in return, I got an improved payment schedule, guarantees that we would be given the next 3 projects without pitch and a meeting with procurement to discuss KPIs so that we could better understand their role and requirements.
The complexity of the politics in play may make Cameron's job more difficult.
He needs to generate value for Britain for any movement he agrees to make to have a fighting chance of creating union within his own party with him. Let alone the rest of the country.
Alan Smith, Partner
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