Value Based Pricing for Marketing Agencies
By Mike Krass on January 20, 2016
Ted Levitt from Harvard said it best:
"...nobody ever buys a three-quarter-inch drill; they buy the expectation of a three-quarter-inch hole"
Traditionally marketing services and consulting contracts were priced in hours; each hour represented a single unit of billable time.
Makes sense, right?
Not according to Tim Williams!
Tim runs Ignition Group, a consulting firm that consults with (ironically) ad and marketing agencies. And Tim says that selling outcomes is far more accurate than selling services.
Outcomes take the form of …
- Business outcomes
- Marketing specific
- Customer related
- Channel specific
- Internal victories or political moves
The MKG Team Tends to Agree With Tim
Regardless of the specific type of services we contract with our clients, no 2 projects ever begin and end exactly the same.
In other words, no two contracts are ever alike
So how do we price our contracts?
The variables we consider from a value and outcomes standpoint include:
- Unique-ness of the Scope of Work: Is this pretty straightforward or will it be highly custom based on what this client needs?
- Outcome Desired: What are we asking to do here - grow traffic/rankings nominally or affect bigger impact?
- Total resources required: This includes human resources (hours invested), internal stakeholder resources (client marketing + engineering teams), tools and other financial resources we're likely to expend on the project