Agencies need to develop more sophisticated pricing models to reflect the value they can bring to a brand and to address the threat from the various players crowding into their space, an IPA white paper argues.
Launching The Price of Success at the IPA’s Business Growth Conference yesterday, Sam Jordan of Manifesto Growth Architects, which co-authored the paper, noted that it’s not just consultancies that agencies have to worry about.
Platforms, publishers and specialists are also jostling for a slice of agencies’ action and all bring new pricing models that don’t rely, as many agencies still do, on cost-plus billing, and that will depend on what they are bringing to the table – business strategy, specialist expertise or quality execution.
Agencies can also learn from other service sectors – a law firm, for example, can bundle different pricing models for the same client.
“This starts to become about aligning the activities and the value with the way that you price them,” he said.
The white paper identifies three charging models, each with various options and each with advantages and disadvantages:
The paper also highlights six pricing factors for agencies to consider:
“It took us a while, but we ended up with a model where the manufacturer paid us a commission, based on how many of those products were produced and sold. It was zero risk for them, it was zero risk for the client, but it was a great ongoing benefit for us as an agency because we can continue to get paid for our IP.”
Launching The Price of Success at the IPA’s Business Growth Conference yesterday, Sam Jordan of Manifesto Growth Architects, which co-authored the paper, noted that it’s not just consultancies that agencies have to worry about.
Platforms, publishers and specialists are also jostling for a slice of agencies’ action and all bring new pricing models that don’t rely, as many agencies still do, on cost-plus billing, and that will depend on what they are bringing to the table – business strategy, specialist expertise or quality execution.
Agencies can also learn from other service sectors – a law firm, for example, can bundle different pricing models for the same client.
“This starts to become about aligning the activities and the value with the way that you price them,” he said.
The white paper identifies three charging models, each with various options and each with advantages and disadvantages:
- Time & materials: agency mark-up; retainer; cost-plus
- Output: commission/fee; deliverable based; productisation; subscription; project appraisal
- Results: business performance; equity
The paper also highlights six pricing factors for agencies to consider:
- Client needs: what they really want and value
- Activities, Services & Products: the agency offering
- Value attribution: what services can be valued
- Risk: where agencies and clients need to be brave
- Relationships: the important of trust
- Commerciality: who owns pricing
“It took us a while, but we ended up with a model where the manufacturer paid us a commission, based on how many of those products were produced and sold. It was zero risk for them, it was zero risk for the client, but it was a great ongoing benefit for us as an agency because we can continue to get paid for our IP.”
Sourced from IPA; additional content by WARC staff
