When we walk into a store to purchase a product in a category in which we have no prior experience, how do we make our choice? Mostly, we depend on value signals. The same dynamics apply to evaluating and selecting professional services …
Viewing entries in
-Pricing Strategy-
Take away timesheets, and most agency executives will proclaim the end of the world. But back when agencies were earning average profit margins of 30%, there were no agency timesheets. The fact is, time tracking isn't required for either pricing or resource management …
Answer this simple question: What is the value of three hours of your time spent on a client’s business? You can probably tell me what the cost of your time is (salary plus overhead), but assigning a value to the time is a much more subjective question …
The vast majority of agencies are focused on delivering “overdeveloped services” – services that are widely available, offered by many providers. By definition, if you’re offering the same type of services that thousands of other agencies do, all across the world, you’ll be living in the world of low margins and intense price competition …
During the past 15 years or so, there has been a pricing revolution in business. Most large successful companies are staffed with professional pricers – people who make their living by determining the value, and therefore the price, of their company’s products and services …
When creating an investment portfolio, no reasonable person would put all their money in just gold, just Certificates of Deposit, or just stocks (especially in today’s economic climate). In a marketing communications firm, your client compensation agreements are your most important financial asset. If they are all based on the exact same compensation system – just fees based on hours, for example – it means you’re not diversifying your portfolio …
It’s true that most clients want an objective outside point of view from their agency. But not until their agency has bothered to take the time to first understand the client’s expectations. Deep down inside, the thing that clients value most is an agency that listens. Not an agency that just takes orders or is afraid to say no. But an agency that is willing to make the effort to understand what the client really wants and needs from the relationship …
If you really want to get paid what your agency is worth, you must first leave that state of denial in which so many agencies find themselves. Sigmund Freud described denial as “knowing-but-not-knowing” — a state of rational apprehension that does not result in appropriate action.” Medicine provides some other potent examples of how “knowing” doesn’t necessarily result in “acting," and how that relates to changing your pricing paradigm …
As agencies become more and more convinced that they should be selling their services based on value instead of costs, they need to learn a new set of skills to help sell the concept of value and get a better price for what they do …
Imagine three agencies presenting to a prospective client. The client has provided all three agencies with a list of guidelines for the presentation, which includes explicit instructions to outline the agency’s proposed compensation approach, including hourly rates, expected hours, and staffing plans …
Consider the deceptively simply question, “Where do profits come from?” When you pose this question to a group of agency professionals, the answers will typically include such things as clients, hours worked, and even efficiency. But the real answer to this question is that profits come from risk …
Agencies want to capture more of the value they create for their clients; in other words, earn more for what they do. The important first step is to understand the nature of value, including how, when, and where value is created …
At a time when prospective clients are scarce, it’s easy to be lured into the belief that some new business is better than no new business. The self-talk among agency executives is that the account “will help keep the lights on” …
Advertising agency income “per unit of work” has fallen 40% during a steady 20-year decline. So reports agency consultant and advisor Michael Farmer, whose research demonstrates that agency staffs are being squeezed to deliver increasing workloads at a time when fees are declining faster than costs. The solution to better margins is obviously not to work harder or do a better job of collecting timesheets. To be able to return to the profit margins they had 20 years ago, agencies need new, different revenue streams …
(CLICK HEADLINE TO READ FULL ARTICLE)
What is the primary reason agencies don’t deliver more innovative solutions for their clients? Lack of talent? Lack of time? In my experience, the latter is much more of a factor than the former. Most successful agencies have some pretty smart people. What most agencies don’t have is a commitment to breakthrough work. They don’t have in place incentives that reward and encourage collaboration and innovative, interdisciplinary problem solving. In fact, most firms have clear disincentives for teamwork; which is a curious irony for an industry that sells “creativity” …
(CLICK HEADLINE TO READ FULL ARTICLE)