If your current clients see you as strictly X type of agency, you will have to work hard to get them to see you differently. The paradigm shift that needs to occur is with THEM and YOU – you need to see yourselves as digital marketers the same as they do. And you both need to make the shift to realizing, thinking and acting on the fact that pricing and executing digital marketing plans is DIFFERENT.
Find other sources for this…eMarketer reports 15.3% of total marketing spent on digital in 2010
The “profit” your client earns is the value their organization derives from the completed assignment. Obviously, the more value you create for the client, the more value you can capture in the form of profit for your own firm. So on every assignment, don’t just focus on how to maximize your own profit; consider how you can optimize your client’s profit as well.
Key questions to help you both determine and validate a price based on value delivered instead of just costs incurred. Pricing an assignment must take into consideration many more factors than just cost (otherwise you will only be doing cost-led pricing instead of price-led costing). Here are key questions to help you both determine and validate a price based on value delivered instead of just costs incurred:
Besides doing good quality work, there are a number of things agencies can do to justify charging a premium price for what they do. Economists and professional pricers teach these principles in other industries; there’s no reason we can’t apply them to the advertising business. Of course the foundation of value-based pricing is to sell outcomes, not hours. You’ll never be able to charge more for what you do by simply adding up timesheets and sending the client a bill. In fact, experience in other professional firms shows that the more you use a formula (like an hourly rate) to price your services, the lower your fees are likely to be. By employing some of the same creativity you apply to your clients’ business to your own business you can start to break out of the commodity pricing trap. Just remember, you are what you charge for.
Pricing – More Fees to the Agency, Less Money to the Media Kimberly Koehly Back in the Black: April 28 – 29, 2011
To run and maintain a healthy business, a seller (the agency) must earn a profit on every transaction. But the buyer (the client) must earn a profit as well. This is the essential nature of value creation.