Last year I worked with a number of agencies which, in addition to their traditional pricing models, introduced value based pricing methodology.
Value based pricing shifts the focus from talking about how the work is done, to the results the client should expect. So to be effective, one needs to get into the clients’ world and think about their requirements and success criteria.
Like all well-constructed brief – scope and key success metrics should be identified, discussed, and agreed at the beginning of the project. In value-based pricing, you ‘price the client’ and determine the ‘value’ delivered to the client, rather than the cost of time it takes you to do the job.
The Duffy Agency in sums it up quite nicely: value-based pricing is “a buyer-centric pricing strategy where work is priced based on the value it delivers to the buyer as opposed to the seller’s time, costs, margins, or historical prices. In practice, it’s more than a pricing model. It’s an approach to business that aligns the financial interests of client and agency to reduce risk and yield a greater return on marketing investments. The only requirement from the buyer is a willingness to share performance data at the outset. Talk to us to see if this approach makes sense for your business.”
One key to the effectiveness of Value Base Pricing, is knowing which success metrics resonate with your client. For Public Relations and Communication Agencies – refer to the PRIA 2018 RCG Benchmark results table of National success metrics.
Alan Weiss and Ronald Baker are two well-known value pricing experts who have received great respect from many service-based businesses, from accounting and consulting firms to creative agencies. Both have authored books which show you how to set a price which reflects the value delivered to the client, rather than measuring the hours it took your team to do the work.
In my opinion, the agencies which were most successful in implementing value based models were the ones which created infographics to show their prospects what the results of their campaign would be. Highly visual, backed with proof from similar campaigns which they had worked on, statistics and graphical results are quite compelling in a proposal document, and easy to present various scenarios and expected outcomes – all about the client; rather than what the agency does and how they do it.
“A picture is worth a thousand words”
To me more than anything, visualising the financial side of the business is the most appropriate way for an agency to report the figures. In most cases we tend be old fashioned in displaying financial results in tables and slabs of numbers, however, we work with visual assets most of the time, so we should be leading the pack to ensure clarity from minute one.
What are the key results which your client is seeking? If you can articulate them, we can find a metric to track and prove your deliverables. Harness the power of your results, amplify outstanding achievements, and celebrate with your team and your client.
Start 2019 with some clear outcomes in mind, and agree what the value of achieving them will be, and remember: it’s not the money, it’s what you do with it that counts, so build proposals which enable your prospects and clients to clearly visualise the expected outcome, supported by anticipated success metrics which will give them confidence to invest in your agency.
Would you like some mentoring – a top-up of external expertise to add value and help to ensure that targets are met? Perhaps consider inviting an external facilitator to re-fresh your meetings and deliver best practice methodologies and expertise.
And if you would like to treat yourself to some complimentary business advice – email or call me – I’d love the opportunity to add value.