BITB -- Pricing: More Fees to the Agency, Less Money to the Media


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Kimberly Koehy's presentation at agencyside's "Back in the Black" account team training.

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  • 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.
  • BITB -- Pricing: More Fees to the Agency, Less Money to the Media

    1. 1. Pricing – More Fees to the Agency, Less Money to the Media Kimberly Koehly Back in the Black: April 28 – 29, 2011
    2. 2. What You Will Learn <ul><li>How to best position yourself [and your agency] as qualified digital marketers </li></ul><ul><li>How to leverage the planning process to achieve buy-in in advance </li></ul><ul><li>How to price based on value rather than cost </li></ul><ul><li>Why it is important to your agency and your clients for you to know your strengths [and therefore your weaknesses] </li></ul>
    3. 3. It’s not YOU, It’s THEM
    4. 4. Lay the Groundwork <ul><li>Educate, educate, educate </li></ul><ul><ul><li>See Uncovering Opportunities slide 14 </li></ul></ul><ul><li>Share success stories & case stories </li></ul><ul><li>Join Digital Industry Organizations – And Participate! </li></ul><ul><li>Make certain your staff understands your digital strengths and can speak to them [with your clients] </li></ul>
    5. 5. Digital Budget Guideline <ul><li>GOAL - 20% of total marketing budget allocated to digital********* </li></ul><ul><ul><li>*********NOTE: This could be drastically underserving your client’s objectives depending upon said objectives and total budget </li></ul></ul>
    6. 6. Strategy vs. Tactics <ul><li>Create the Digital Marketing Strategy WITH your client </li></ul><ul><ul><li>Facilitated session(s) with key stakeholders to define objectives and achieve buy-in </li></ul></ul><ul><li>Deliver a plan that meets objectives and budget parameters defined </li></ul><ul><ul><li>Agency versus Media fees will be irrelevant </li></ul></ul>
    7. 7. Real Life Example
    8. 8. Paid Media
    9. 9. Earned Media
    10. 10. Social Media
    11. 11. Niche Media
    12. 12. I’m Sorry…
    13. 13. Cost Pricing <ul><li>Use with CAUTION! </li></ul><ul><li>Know the hourly value of your team </li></ul><ul><li>Get input from the assigned resources </li></ul><ul><li>Beware of Scope Creep! </li></ul>
    14. 14. Value Pricing <ul><li>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. </li></ul>
    15. 15. Questions to Ask [Yourself] <ul><li>Where are we delivering on the client’s value chain? </li></ul><ul><li>How important is this to the strategic objectives of the client? </li></ul><ul><li>What is the financial impact of the desired outcomes? </li></ul><ul><li>What is the client’s cost of not solving this problem? </li></ul><ul><li>What level of talent and creativity will be required? </li></ul><ul><li>How complex will this assignment be to manage? </li></ul><ul><li>How time-sensitive is this assignment? </li></ul><ul><li>What kind of resources (time and effort) will be devoted by the client? </li></ul><ul><li>Will we be creating long-term value for this client? </li></ul><ul><li>Who will own the intellectual property? </li></ul><ul><li>How much risk are we willing to take? </li></ul><ul><li>To what degree are we uniquely qualified for this assignment? </li></ul>
    16. 16. Charging a Premium Price <ul><li>Fixed price vs. variable price </li></ul><ul><li>Service guarantee </li></ul><ul><li>Pre-authorized pricing </li></ul><ul><li>Customized payment terms </li></ul><ul><li>Risk along with reward  </li></ul><ul><li>Ownership of intellectual property </li></ul>
    17. 17. Industry Benchmarks <ul><li>AGI </li></ul><ul><li>Margin </li></ul><ul><li>Net Income </li></ul>
    18. 18. Resources <ul><li>AAAA’s paper on Digital versus Traditional </li></ul><ul><ul><li> </li></ul></ul><ul><li>Ignition Consulting Group </li></ul><ul><li>Implementing Value Pricing , by Ronald J. Baker </li></ul>
    19. 19. My Details <ul><li>Kimberly Koehly </li></ul><ul><li>[email_address] </li></ul><ul><li>602.722.0149 </li></ul><ul><li>@kimberlykoehly </li></ul><ul><li> </li></ul>