Friday, March 27, 2009

Budget-based Solution Crafting

There’s an old, old joke whose punchline is, “I know what you are, my dear, we are now just negotiating price!” If you know this joke* , you recognize it as the quintessential business negotiation: the delta between the price someone will sell for and the price someone is willing to pay. It is the ultimate win-lose negotiation, with each party having to yield to or gain ground from the other.

Thanks to the current economic environment, a new approach to price negotiation is emerging. We call it “Budget-Based Solution Crafting” and it is exactly that. Custom solutions are molded and adapted to fit the realities of the customer’s budget. Rather than a win-lose, yield-gain struggle, the discussion centers around value: best options for the dollars available. It is a very smart approach for limited funds and tight credit.

In Budget-based Solution Crafting, the customer tells the proposed vendor exactly what she has available to spend. The vendor then adapts “regular” services into “custom” services to fit the budgetary restriction. It’s not a new concept, but it is typically not used much in lit support, where services tend to be sold on a fixed, transactional basis (per page, per GB, etc.) and where customers are often comparing commodity services. But while it can be scary to tell a vendor exactly how much you have to spend, it is the single best way to gain a solution that meets your client’s needs

Think of it like buying a wedding gift. You look at the bridal registry and you find a gift that you like, that you already know the bride and groom will like, and that fits your spending budget. No guesswork, no surprises, no haggling. Everybody wins.

The same concept works well for outsourced litigation support services. There are lots and lots of different services you can buy, at many varying price points. Rather than assume apples-to-apples service levels and price points, try putting the price point out first and then understanding what sorts of services (and bundles of services) are available at that level.

Here is a great way to think about Budget-Based Solution Crafting: pretend you are buying a car. Price-first is how we typically buy cars. Typically, a car buyer knows whether they are in the Porsche, Camry or Yugo class. Once they decide the class level, they can evaluate options in that class. Camry or Accord? Sunroof or navigation system? By buying services in this way, the customer is assured of the best value possible for the funds available.

The purchase of outsourced litigation support services lends itself very well to such an approach. Do you really need every document converted to TIF image? Do you really need to host all those non-responsive, irrelevant documents? Do you really need to look at all those duplicates during review? Probably not. So, why pay for them? Or, more importantly, why assume you have to pay for them and thus not select anything which could help? Customizable services can overcome that paralyzing all-or-nothing dynamic.

Quite frankly, your vendor should be your best ally. They should bend over backwards to try to get you what you need at a price you can afford. Like cars, there are lots and lots of options, at all price levels.

So, try it on your next project. Tell your vendor what you realistically have to spend and seek their advice on how best to spend it. You’ll be glad you did.


* If you do not know this joke, please contact me offline. Unfortunately, some of the joke setup is not appropriate for this family-friendly blog forum.