Moving beyond time-based pricing models

Innovation in the way agencies price their services has lagged behind the innovation shown in the products and services they offer. 

Yet, unless the way agencies price their products and services changes, the challenges they face commercially will continue. And these challenges are many and varied.

For instance, sometimes clients effectively end up buying a 'yard of advertising' with little sensitivity to how challenging and complex the input can be. There can be confusion around what a deliverable is – suggesting a need to define interim deliverables because complex projects have many milestones. And, how can agencies avoid elastic timelines for delivery of outputs? You might be paid “when the end asset is delivered” despite delays beyond your control.

Given the many drawbacks of time-based charging, especially for creative thinking, it could be an attractive idea for an agency to move to an output-based model. But what if they have only ever operated on a time-based model to date? How do we change as agencies and clients if we measure everything through timesheets right now? And, what if we do change, and find out that we have driven our prices down without identifying any efficiencies in how we run, or service, the business?

In Pricing for Success, we want to achieve three things:

1. Build on the ideas presented in the IPA’s 2019 report The Price of Success by the IPA’s Commercial Leadership Group, which gave us the tools and ideas behind pricing, but we want to take this a step further with a practical guide.
2. Show agencies that - while they may not always realise this - they are already well set up to innovate with pricing. This guide should give them a final push to price differently, in a way appropriate to their products, services and the current client relationship. As well as the practical advice to do so.
3. Destroy the myth that you can only innovate with pricing having established a long term agency-client relationship. You can innovate with pricing at any stage. The elements of risk and reward might be different at different times in the relationship but if you understand the difference, you can evaluate the situation you are in and innovate where appropriate.

Examine any agency and client relationship through this lens, and you should find it a lot easier to develop a robust and objective model which works. Your creativity should then get the commercial innovation it deserves.

Marc Nohr is Chairman of the IPA's Commercial Leadership Group, Chairman of Fold7 & Group CEO, Miroma Agencies. This is an excerpt from his foreword for Pricing for Success, launched at the IPA Business Growth Conference 2020. 

In January, you have the opportunity to take part in a workshop with the Pricing for Success authors, Vlad Komanicky, Alchemists Founding Partner, and Henry Wisdom, Head of Commercial Consultancy. It will help you understand how to successfully innovate commercially as much as you innovate creatively.