The IPA has published ‘The Value of Advertising – a guide on billing vs pricing’ to help its agencies to develop a more sustainable and valuable model.
Endorsed by the DMA, IPM, MAA, MRS and PRCA, the guide provides practical advice on how to understand the value of advertising (and by extension marketing services and creative knowledge work generally), how to negotiate it, new ideas for capturing vale and how to put pricing theory into practice.
Says Janet Markwick Global EVP Commercial Operations and Production, Y&R and IPA Honorary Treasurer: “Time is money! But using purely time to define the value of our work is simply crazy. The truth is we all know this, yet for too long the industry has failed to create alternative approaches, choosing to place the blame on client procurement teams or zero-based budgeting approaches. There is only one business responsible for pricing its services and agreeing the price and that is us. The need to get serious about measuring the value our industry generates for brands has never been more urgent or critical. By measuring and reporting this value we can begin to better determine what a ‘good price’ for the services is. We all know that ‘time’ is no measure of creativity or of the return (sales and profits) that advertising delivers.”
The publication is available only to members of the IPA and endorsing bodies, and is aimed at:
Says Dame Cilla Snowball, Group Chairman and Group Chief Executive, AMV BBDO: “Agencies not only need to create work that works for their client businesses, they need to do so underpricing models that work for their own businesses too. Such models should be win-win for both parties with a value proposition at their core. Only with a sensible consideration, and focused implementation, of various pricing strategies will such needs be met.”
Says Tom Lewis, Director of Finance, IPA: “It’s an age-old problem – agencies talk about costs; they talk about billing; but rarely do they give their clients a price for the work they do that reflects anything other than the time they’re going to bill for – i.e. their value. We believe all agencies are capable of progressing towards a more sustainable and valuable commercial model, and this paper covers what these can look like, why you should explore them and, all importantly, how to put them into practice. This pricing revolution won’t happen overnight. We have a whole generation of agency staff that has only ever been taught the Cost-Plus model, many of whom won’t even be aware there might be better alternatives.”
The report has been researched, collated and summarised by Tom Lewis, Finance Director IPA with key contributions from:
Additional thanks go to:
To access further practical guidance on how to grow your business, including videos from the IPA’s Business Growth Conference held this week, visit the IPA’s Business Growth Conference Content Hub. You can also join the conversation on Twitter at #IPACommercial