The official blog of Ignition Consulting Group
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-Pricing Strategy-
If discussions about agency compensation seem like a circular conversation, it’s because most firms are debating the wrong thing. Clients will always try to steer the discourse to focus on cost. Your job is to present and defend the value you’re creating for your client’s business …
Should you aim high or low when a client asks you to “guesstimate” the price of a project? Most of us know the answer to this question, and it’s thanks to the world of behavioral economics that we have insights into the principles of pricing psychology. Decades of study and experimentation in behavioral economics have produced a set of immensely useful guidelines that can help professional service firms get paid what they’re worth …
Has your firm turned the corner on agency compensation? Many agency executives insist they have, pointing to the fact they have negotiated better hourly rates, better retainers, or better terms on cost-plus remuneration agreements. The problem, of course, is that they are simply getting better and better at doing the wrong thing …
Who determined the price of the car you drive, the mobile phone you use, or the software systems you use? Which internal function inside these companies made the decision about what to charge for their products or services? The answer, surprising as it might be to professional services executives, is NOT the finance department …
Surveys show that client organizations are unfortunately critical of agencies’ willingness and ability to deliver proactive thinking. They praise agencies for being responsive (reactive) but give them failing grades for being proactive. We can lay much of the blame at the feet of the hourly rate …
In the agency business, your most valuable product is innovative ideas that solve business problems. Yet countless agencies give these concepts away at a price of $0. In new business situations, most firms present game-changing, category-creating programs, campaigns and concepts capable of creating immense value for their clients and extract no value in return …
While these unstable times make it infernally difficult to forecast your fiscal year revenue, there is a set of attributes and behaviors that can help foretell your firm’s long-term success. These are leading indicators, meaning they are predictive and diagnostic — the actions and attitudes that produce outsized financial and reputational capital for your firm …
The most troublesome and contentious questions about billing are almost always around the question of agency hours. “Why did this take so many hours?” or “Can’t this be done in less time by fewer people?” The solution here isn’t to train your people to be better prepared for answering questions about hours, but to change the conversation you’re having in the first place …
Have you ever read a book about pricing? For most professionals, the answer is no. The people who buy your services, however, have completed entire courses of study around pricing, purchasing, and strategic sourcing. When procurement managers walk into a pricing negotiation, they’re very well-armed. On our side of the table is an executive trained in client service, often accompanied by someone from finance. But a background in marketing and accounting is hardly the same thing as deep expertise price negotiation strategies …
Do the people in your firm complain about an overwhelming number of simultaneous priorities? Does every task and client request have an ASAP attached to it? Not every client has paid the price of a first-class seat in your organization, and your organization doesn’t have the human or economic resources to lavish first-class service on clients who only paid a coach price …
If a talented art director in your firm can design a brilliant logo in five minutes instead of five weeks, should you get paid less — or more — for it? In the flawed pay-by-the-hour system, the only way your firm could possibly capture the value you have created is for the art director to misrepresent the truth on her timesheet …
Given the pervasiveness of time tracking in professional services, it’s understandable that even those managers who have become convinced that recording time is an ineffective way of measuring success feel at a loss when looking for a metric to replace it. This article recommends 22 of them …
Business professionals have a voracious appetite for the “best practices” in their industry. But transformative changes in society are always the result of changing our thinking, not changing our practices. When we reform our paradigm — our mental map — we can’t help but change our practices …
Who is the worst person to do the pricing in your firm? Many times it’s the CEO. It’s often the top people in the organization who are the most willing to discount fees and meet the demands of professional buyers…
Most firms feel they’re stuck on a treadmill when it comes to agency compensation. Actually, it’s more of a time warp. That’s because the cost-plus model employed in most agency-client agreements dates back to the early days of the industrial age …
