Progressive Pricing Strategies 2019

THE PROBLEM THE PARADIGM THE PRINCIPLES THE PRACTICES
PROGRESSIVE
PRICING
STRATEGIES

SKIP THIS STEP
+ $300 million in online sales

The Practices that can help ﬁrms make the pricing transformation
The Problem we’re trying to solve and why it’s time to view it as an opportunity
The Paradigm of moving away from selling our costs to selling our value
The Principles that guide professional pricing in the 21st century

AVERAGE AGENCY PROFIT MARGINS
1960s 2010s
30% 10%

THE 20+ YEAR DECLINE IN AGENCY PRICING
Study by Farmer & Company
MORE WORK FOR
LESS MONEY

1960s
2010s
COMMISSION
SYSTEM
ADOPTION OF
TIME-BASED FEES
“BALKANIZATION”
OF AGENCY
BUSINESS
CORPORATE FOCUS ON
“SHAREHOLDER VALUE”
GLOBALIZATION
“FINANCIALIZATION”
OF BUSINESS
RISE OF
PROCUREMENT
EXPLOSION OF
MEDIA CHANNELS
MOVEMENT TOWARD
PROJECT WORK
AGENCY PRICING
INFLECTION POINTS
DOMINANCE
OF DIGITAL

THE EFFECTS OF THE PROBLEM
COMMODITIZATION OF
AGENCY SERVICES

OVERWORK & BURN-OUT

TALENT RETENTION

2
31
LOWER FEES
LOWER TALENT
LOWER VALUE
“A 25-year death spiral.”
Jon Bond
Co-Founder, KBS+
Founder, Tomorro

THE PROBLEM (AND OPPORTUNITY)
—
WHERE DO WE STAND NOW?

1. Our client-facing teams have a good understanding of how the firm creates value and what that value should
be worth to our clients.
2. We begin every new client relationship and major assignment with a discussion of “Scope of Value” (expected
outcomes) before we discuss “Scope of Work” (expected deliverables).
3. In pricing discussions, we focus the dialogue around outputs and outcomes (results and deliverables) rather
than inputs (hours and time of staff).
4. We are willing to be a true stakeholder in our clients’ success by sharing in both risks and rewards.
5. We proactively price every assignment based on the value (expected outputs or outcomes) to the client rather
than estimating the costs (inputs such as hours or time of staff.)
6. We are willing to walk away from prospective clients who require us to disclose our costs.
7. We pay just as much attention to external measurements (marketing outcomes, business results, etc.) as we
do internal measurements (hours, labor costs, etc.).
8. We apply as much creativity to pricing as we do solving our clients’ marketing problems.
9. Our current business model incentivizes our people to be effective (produce results), not just efficient (hold
hours to estimate, meet billable time targets, etc.)
10. Just as our clients are trained to be professional buyers, our client-facing executives are equally well trained in
the art of professional selling (pricing, presenting, and defending value).
1 2 3 4 5 6 7 8 9 10
STRONGLY DISAGREE STRONGLY AGREE
PROGRESSIVE PRICING: WHERE DO WE STAND NOW?

—
THE POWER OF PRICE

REVENUES
PRICING
Fixed Costs
Variable Costs
Volume (Revenues)
Pricing
PROFIT
IMPROVEMENT
What’s the most
effective way to
improve profitability?
A 1% improvement (reduction) in variable costs will improve profit by:
A 1% improvement in volume (revenues) will improve profit by:
A 1% improvement (reduction) in fixed costs will improve profit by:
A 1% improvement in pricing will improve profit by:
4%
7%
3%
11%

Warren Buffet
“The single most important decision in
evaluating a business is pricing power. If
you’ve got the power to raise prices
without losing business to a competitor,
you’ve got a very good business.
And if you have to have a prayer session
before raising the price by 10 percent, then
you’ve got a terrible business.”

BUSINESS MODEL
Solutions
Offered
Markets
Served
CREATE VALUE
Production
Model
Organizational
Structure DELIVER
VALUE
CAPTURE
VALUE
Cost
Structure
Revenue
Model
© Ignition Consulting Group, Inc.

—
PROFESSIONAL BUYERS
VS. AMATEUR SELLERS

PROFESSIONAL BUYERS
OUR CLIENTS ARE

AMATEUR SELLERS
PROFESSIONAL BUYERS

PROFESSIONAL BUYERS
1. Believe all procurement ploys are real.
2. Focus on defending costs instead of proving value.
3. Willing to reduce price without also reducing value.
4. Fail to establish value up front.
5. Unwilling to walk away.
AMATEUR SELLERS
AMATEUR SELLERS ARE VULNERABLE TO
PROGRESSIVE PRICING STRATEGIES

—
WHY CLIENTS
FAVOR A CHANGE

“Two-Thirds of Global Marketers to
Change Agency Compensation”
Advertising Age report on study by U.S.-based
Association of National Advertisers (ANA)
To improve business results
The leading reason?

—
THE POSITIVE SIDE OF
THE PROBLEM

Peter Drucker
“Stop solving the problem and
start pursuing the opportunity.”

THE PRICING
REVOLUTION
DYNAMIC PRICING

THE PRICING
REVOLUTION
CONGESTION PRICING

THE PRICING
REVOLUTION
Software Downloads
Autopilot feature: $3,000
Increased range: $9,000
ADD-ONS PRICING

THE PRICING
REVOLUTION
Hotel prices for Apple device users are $30 more per night.
PARTITIONED PRICING

THE PRICING
REVOLUTION
PAY-WHAT-YOU-WANT PRICING

THE PRICING
REVOLUTION
TWO-PART PRICING

THE PRICING
REVOLUTION
PAY NOW, USE LATER

THE PRICING
REVOLUTION
USAGE-BASED PRICING

THE PRICING
REVOLUTION
OTHER CREATIVE PRICING
“Pay your age.”
“Uninterrupted ﬂying time.”

THE PRICING
REVOLUTION
INNOVATION IN PRICING: AGENCIES

COMPETITOR-BASED
Penetration Pricing
Skim Pricing
CUSTOMER-BASED
Solution-Based
Value-Based
WEAK
Pricing
Competency
MODERATE
Pricing
Competency
STRONG
Pricing
Competency
PRICING
COMPETENCY
COST-BASED
Cost Plus
Hourly Billing
PRICING
METHODOLOGY
PRICE TAKER
PRICE FOLLOWER
PRICE MAKER
THE (R)EVOLUTION OF PRICING

MODERN
PRICING
PRACTICES
DYNAMIC PRICING
TWO-PART PRICING
FREEMIUM PRICING
PAY WHAT YOU WANT PRICING
ADD-ONS PRICING
BUNDLED PRICING
CONGESTION PRICING
SKIM PRICING
PENETRATION PRICING
OPTIONS PRICING
TIERED PRICING
USE NOW, BUY LATER PRICING
PER USE PRICING
SUBSCRIPTION PRICING
FUTURE PURCHASE OPTIONS PRICING
OFF-PEAK PRICING
PRIORITY ACCESS PRICING
… AND MORE
THE PRICING
REVOLUTION

THE PARADIGM
—
THE RIGHT PARADIGM BUILT
ON THE RIGHT THEORY

“If you want to make minor, incremental
changes, work on practices.
But if you want to make significant,
quantum changes, work on paradigms.”
Stephen Covey
Author, “7 Habits of Highly Effective People”

par·a·digm
pattern of something; a model
a worldview underlying the theories and methodology of a particular subject
synonyms: model, pattern, exemplar, template, standard, prototype, archetype
“Your paradigm is the equivalent
of an algorithm in your brain.”

WHAT CAUSES INFECTIONS?
PRIOR TO 1850’s
Paradigm: Stale air causes infections
Practices: Increase air circulation
1870’s AND BEYOND
Paradigm: Germs cause infections
Practices: Wash hands, sterilize
instruments and operating rooms

DEFINITION OF VALUE
LABOR THEORY OF VALUE
Karl Marx
The value of a good or service is
equal to the amount of labor
required to produce it.

DEFINITION OF VALUE
SUBJECTIVE THEORY OF VALUE
Marginalist School of Economics
Value is subjective, since the
same item will have a different
utility to different people under
different circumstances.

WHY THE BILLABLE HOUR DESERVES TO DIE
1. It looks in the wrong place for value.
2. It focuses on inputs instead of what clients really
buy (outputs and outcomes).
3. It commoditizes the firm’s offerings into
standardized units, lessening the client’s ability
to appreciate the difference between providers.
4. It encourages a production/utilization mentality
instead of a spirit of proactivity, collaboration
and innovation.
5. It penalizes increased expertise and operational
improvements that delivers work faster.
6. It places an artificial ceiling on the firm’s profits.
7. It prevents true partnership because economic
incentives are misaligned.

There’s only place “time spent”
should matter: in prison.

THE PARADIGM
—
COST VS. PRICE VS. VALUE

7 cents
COST PRICE
$.50 Slab of 24
$1.49 Supermarket
$1.99 Convenience store
$2.50 Vending machine
$3.75 Cafe
$4.50 Restaurant
$5.00 Hotel mini-bar
Price variation of 400%
OBJECTIVE & CONSISTENT SUBJECTIVE & VARIABLE

PRICECOST
OBJECTIVE & CONSISTENT SUBJECTIVE & VARIABLE

COST vs. PRICE
A monetary calculation of
resources and materials required
to produce a product or service.
A Calculation
TACTICAL
A Judgment
What a buyer is willing to pay.
STRATEGIC

THE PARADIGM
—
WHAT YOU REALLY SELL, AND
WHAT CLIENTS REALLY BUY

What is the inventory of a
professional services ﬁrm?

Are you selling the drill
or the hole?

Tangible
Value
30%
Intangible
Value
70%
MARKET VALUE OF MAJOR COMPANIES
Law Firms
Accounting Firms
Etc.
Agencies
PR Firms
Etc.

Source: “Brand Equity and the Bottom Line,” by Peter Walshe and Helen Fearn, Millward Brown, Admap, March 2008
WHAT AGENCIES DO
IS EXCEPTIONALLY
VALUABLE

THE PARADIGM
—
OUTCOMES, OUTPUTS, INPUTS

Time on setInputs
Hours, time of staff
Fixed fee of $20 millionOutputs
Deliverables, work product
7% of box officeOutcomes
Results, effects
Tom Hanks in Forrest Gump THREE BASIC CHOICES FOR HOW WE CHARGE

OutcomesOutputsInputs
3,200 hours of client service time
800 hours of account planning time
6,400 hours of creative time
1,500 hours of production time
UNITS OF VALUEUNITS OF COST

Strategic plans
Recommendations
Brand identity
Campaign elements
Digital platforms
Activations
Social postings
Earned media
placements
Analytics reports
Etc.

Store trafﬁc
Leads
Trial
Webpage views
Online registrations
Brand awareness
Brand fame
New customers
Repeat purchase
Incremental sales
Etc.

Business-Related Outcomes Sales, market share, market penetration, percent of full-price sales, average price per sale, etc.
Marketing-Related Outcomes Inquiries, leads, store trafﬁc, search engine rankings, web page views, purchase frequency, number
of new customers, press coverage, online mentions, etc.
Customer-Related Outcomes Brand awareness, brand preference, intent to purchase, brand ratings, likeability of brand, would
recommend to a friend, willingness to pay price premium, etc.
Channel-Related Outcomes Average sale per dealer, dealer knowledge, dealer referrals, channel turnover, channel inquiries,
etc
Internal Outcomes Employee product knowledge, internal brand adoption, etc

TRANSACTIONAL BEHAVIORAL ATTITUDINAL
Volume growth
Organic revenue growth
Incremental sales
Same store sales
Market share
Market penetration
Cost per sale
Stock price
Cost per lead
Number of new customers
Customer retention rate
Share of wallet
Etc.
Repeat purchase
Ever tried brand
Purchase frequency
Inquiries
Online registrations
Click-throughs
Website unique visitors
Online search volume
Online endorsements
Customer referrals
Etc.
Brand awareness
Brand knowledge
Brand fame
Brand preference
Intent to purchase
Brand likeability
Willingness to recommend
Etc.

VISIBLE TO AGENCY
VISIBLE TO CLIENT

CLIENT: I want to hire you for your expertise and your ability to create and execute transformational business
ideas for my company.
AGENCY: Excellent, we are ideal for that challenge.
CLIENT: Yes, but before I hire you I have a few important questions.
AGENCY: Okay, shoot. What do you mean?
CLIENT: What will you charge me?
AGENCY: $1 million dollars for our ability to work with your organization to create the idea, and then if we move
it forward another million because truly transformational business ideas are valuable and in limited supply.
CLIENT: Why $1 million?
AGENCY: What do you mean?
Jason DeLand
Partner, Anomaly

CLIENT: Well if I understand how you arrived at it, then I can negotiate it down.
AGENCY: But I don’t want you to negotiate it down. That is money out of my pocket.
CLIENT: Yes, but it’s a privilege to work on my brand and you’ll get lots more business from it.
AGENCY: I will? Can you guarantee that?
CLIENT: No. But I still need to know how you got to your price.
AGENCY: Well, OK ... I looked at the size and scope of the opportunity and considered the value of us
addressing it for you and calculated a price that I am willing to do it for. A price that I believe to be competitive
in the market and a price that affords me the peace of mind that I can make a bit of money.
CLIENT: Oh, but I need more than that. I need to know who will do the work... and the amount of time it takes
for them to do it.
AGENCY: The team I said will do the work...and it will take as long as it takes until we have an outcome that
everyone is happy with.
CLIENT: Yes...but what if just one person cracks it in one day...and you then execute it with a small team in three
weeks – that is not worth a million dollars.
AGENCY: You’re 100% correct. It’s worth more.... If that happens, we will double it!

“You will never be paid more
than you think you’re worth.”
Pricing expert Alan Weiss

THE PRINCIPLES
—
CHANGING OUR LANGUAGE

CHANGE YOUR
PARADIGM
LANGUAGEIS THE PRECURSOR TO BEHAVIOR CHANGE
CHANGE YOUR
LANGUAGE
CHANGE YOUR
BEHAVIOR
“All transformations
are linguistic.” WERNER ERHARD
FOUNDER OF “EST”

LANGUAGE OF COST LANGUAGE OF VALUE
COST
HOURS
ESTIMATES
RATES
HOURLY RATES
BILLABLE TIME
CHARGE-OUT RATES
LABOR
RATE CARDS
TIME OF STAFF
COST OF SERVICE
PRICE OUTCOMES
TALENT
RESULTS
SOLUTIONS
OBJECTIVESVALUE CREATED
METRICS OF SUCCESS
ACCOUNTABILITY
EFFECTIVENESS

NOT BUT
Cost Price
Estimate Price
Rates Price
Hours Resources, team, talent
Billable Time Resources, team, talent
Labor Resources, team, talent
Time of staff Resources, team, talent
FTEs Resources, team, talent
Budget Investment
Out of hours Out of scope
Over estimate Out of scope
Bonus Outcome-based price
Contract Agreement
Bill Invoice
Efficiency Effectiveness
THE RIGHT
CLIENT-FACING
LANGUAGE
Discount
Reconciliation
Overhead
Overhead recovery
Utilization
Written-off time
Burn rates
Burn down
Multiples
Shortfall
NOT EVER

THE PRINCIPLES
—
TOP-DOWN VS. BOTTOM-UP

CUSTOMER
VALUE
PRICE
COST
PRODUCT
BOTTOM-UP
COSTING
TOP-DOWN
PRICING
TWO VERY DIFFERENT APPROACHES

CHRYSLER 300
Cost to Chrysler Identical
CHRYSLER 300C
Price to customer + $10,000
“Hemi” engineRegular engine

FedEx 1-Day FedEx 3-Day
HIGHERPrice to customer LOWER
Cost to FedEx LOWER HIGHER

THE PRINCIPLES
—
DEVELOPING A PRICING STACK

THE MODERN PRICING SPECTRUM
SIMPLE COMPLEX
A fixed price based on the
estimated value of outputs
A variable price based on the
estimated value of outcomes
Unlimited creative
pricing strategies

XNOT A
RATE CARD
DYNAMIC PRICING
EQUITY
PROJECT POINTS
SUBSCRIPTION-BASED
OUTPUT-BASED
OUTCOME-BASED
FIXED PRICE OPTIONS
ROYALTIES
USAGE-BASED
AGILE SPRINTS
A PRICING
STACK

DYNAMIC PRICING
EQUITY
PROJECT POINTS
SUBSCRIPTION-BASED
OUTPUT-BASED
OUTCOME-BASED
FIXED PRICE OPTIONS
ROYALTIES
USAGE-BASED
AGILE SPRINTS

DYNAMIC PRICING
EQUITY
PROJECT POINTS
SUBSCRIPTION-BASED
OUTPUT-BASED
OUTCOME-BASED
FIXED PRICE OPTIONS
ROYALTIES
AGILE SPRINTS
USAGE-BASED

DYNAMIC PRICING
EQUITY
PROJECT POINTS
SUBSCRIPTION-BASED
OUTPUT-BASED
OUTCOME-BASED
FIXED PRICE OPTIONS
ROYALTIES
AGILE SPRINTS
USAGE-BASED
SOLVE DRIVE BUILD
Strategic Direction
Ideation
Problem Solving
Client Service
Project Management
Workflow Management
Execution
Implementation
Distribution
SOLVE DRIVE BUILD
Assignment 1 30 20 50

AN EFFECTIVE INVESTMENT PORTFOLIO

UNIFORM PRICING
Cost-based calculations based on a formula
that creates a self-imposed ceiling on proﬁt
AN EFFECTIVE PRICING PORTFOLIO
VARIABLE PRICING
Employing varying pricing approaches based on
customer value instead of agency cost
VS.

Uniform
Price
Variable
Costs
PRICE
VOLUME
POTENTIAL
PROFIT
Variable
Costs
PRICE
VOLUME
POTENTIAL
PROFIT
The proﬁt potential from
a business model based on a
uniform approach to pricing
vs.
THE PROFIT TRIANGLETHE PROFIT RECTANGLE
The proﬁt potential from
a business model based on
many different types of pricing
UNIFORM PRICING VARIABLE PRICING

PRICING
ALL-STARS
VARIABLE PRICING

PRICING
ALL-STARS
“We have as many
compensation approaches
as we do clients.”
Eric Lear
VARIABLE PRICING

1. SAME STORE SALES
2. ORDERS
3. TICKET SIZE
VARIABLE PRICING

“All of our pricing
approaches are experiments
in capturing value.”
Co-Founder Carl Johnson
VARIABLE PRICING

INVESTMENT OF
FINANCIAL CAPITAL
INVESTMENT OF
INTELLECTUAL CAPITAL
VARIABLE PRICING

Mike Duda, Founder
VARIABLE PRICING
“We’re willing to put money into the
equation, and that changes the
conversation. You go from being
someone who makes ads to helping
CEOs get results.”

VARIABLE PRICING

CAPTURING VALUE IN MULTIPLE WAYS, THROUGH MULTIPLE REVENUE STREAMS
+Fixed Price Agreement (FPA)
Project-Based Fixed
Prices for Additional
Out-of-Scope Outputs
CLIENT A
Outcome-Based Price Using Set of Weighted Success MetricsCLIENT B
+ + +Base Fee Price Per Outcome
Shared IP
Ownership
EquityCLIENT C

COMBINATIONS OF
RISK & REWARD
Toronto Agency
PAYOUT
RISK/REWARD

RISK/REWARD PROFILE
CLIENT RISK/REWARD PROFILE PERCENT OF FIRM’S TOTAL REVENUE
What level of pricing diversification currently exists at your firm?

THE PRINCIPLES
—
PRICE THE CLIENT, NOT THE SERVICE

PRICE THE CLIENT, NOT THE SERVICE

“The profit increase we can
realize from differentiated
prices is always greater than
when we try to fine-tune our
way to an optimal price.”
Hermann Simon
Simon-Kutcher & Partners
Author of “Confessions of a Pricing Man”
PRICE DISCRIMINATION
Different prices to different customers

THE PRACTICES
—
SCOPE OF VALUE
BEFORE SCOPE OF WORK

SCOPE OF WORK
SCOPE OF VALUE
THE PRACTICES ãIgnition Consulting Group | www.ignitiongroup.com
Scope of Value
Agencies are skilled at developing Scopes of Work, but rarely stop to ask about “Scope of Value.”
Before beginning any major assignment, ask a client or prospect if you can conduct a “Success
Workshop” in order to determine the goals and objectives of the assignment. In this way, you'll be
able to quote a price based on perceived value factors instead of just estimated cost factors.
Here are some of the key questions to explore in a success workshop:
1. What is your company’s profit model? How does your brand/company make money?
2. Overall, how do you know when your brand is succeeding in the marketplace?
3. How do you know when it's failing?
4. In each of the following areas, what are the most important success metrics for your brand? *
Business-Related Outcomes. To what degree is this assignment expected to result in hard
measurable outcomes? This can include such indicators as sales, market share, market penetration,
percent of full-price sales, average price per sale, incremental profit, etc.
Marketing-Related Outcomes. To what extent is our work together expected to produce what
could be considered marketing-related outcomes, sometimes referred to as “intermediate” metrics?
These include inquiries, leads, store traffic, search engine rankings, web page views, purchase
frequency, number of new customers, press coverage, online mentions, etc.
Customer-Related Outcomes. To what degree is this assignment expected to produce changes
in behavior or attitudes among customers? This could include such things as brand awareness, brand
preference, intent to purchase, brand ratings, likeability of brand, would recommend to a friend,
willingness to pay price premium, etc.
Channel-Related Outcomes. Are there specific objectives related to the sales or distribution
channel, such as average sale per dealer, dealer knowledge, dealer referrals, channel turnover,
channel inquiries, etc.?
Internal Outcomes. What results, if any, are expected among internal audiences (at the client
company itself), including such things as employee product knowledge, internal brand adoption, etc.?
Success Metrics
Following is a menu of success metrics to help facilitate a Success Audit. This list is organized into the
areas of Company, Customer, and Channel.
Within each of these broad classes, the success metrics are further categorized in three ways:
Transactional, Behavioral, and Attitudinal.

BRIEFS PROPOSALS RECOMMENDATIONS PLANS RFP RESPONSES
SCOPE OF VALUE
SCOPE OF WORK
SCOPE OF VALUE
SCOPE OF VALUE
SCOPE OF WORK
SCOPE OF VALUE
SCOPE OF WORK
SCOPE OF VALUE
SCOPE OF WORK
SCOPE OF VALUE
SCOPE OF WORK
SCOPE OF PARTNERSHIP
SCOPE OF IMPACT
1 What is your company’s profit model? How does your brand/company make money?
2 How do you know when your brand is succeeding?
3 How do you know when your brand is failing?
4 What do you consider to be the critical success factors for your business? For your marketing program? Among customers?
5 If these metrics are not clear, to what degree can we help you identify them?
6 What do you not measure about your business that you would like to measure – and why?
7 Based on your profit model, which of our firm’s offerings do you most value?
8 What specific results do you hope our services will help you achieve?
9 How do you measure success today with your agency?
10 If money weren’t an issue, what role would you want us to play in your business?

LEADING INDICATORS
LAGGING INDICATORS
Sales
Market share
Marketing cost per unit
Test drives
Website visits
Search engine results

DYNAMIC PRICING
EQUITY
PROJECT POINTS
SUBSCRIPTION-BASED
OUTPUT-BASED
OUTCOME-BASED
FIXED PRICE OPTIONS
ROYALTIES
USAGE-BASED
AGILE SPRINTS
FIXED PRICED OPTIONS

NO SUCH THING AS
ABSOLUTE VALUE
Buyers need context to ascertain value
and make decisions about price.

AIRLINE WEB DEVELOPMENT ASSIGNMENT

ALEXA SKILLS APP DEVELOPMENT
COMPREHENSIVE OPTION BALANCED OPTION BASELINE OPTION
7 high-level themes 7 high-level themes 7 high-level themes
Robust decision tree / Error support Basic decision tree / Error support Basic decision tree / Error support
CMS implementation CMS implementation —
Skills card integration Skills card integration Basic skills implementation
Recorded responses Recorded responses Text to voice responses
Testing Testing Testing
Location details integration Location details integration —
Custom landing page Product detail page Product detail page
Analytics Analytics Analytics
Digital banner campaign (1 concept) Digital banner campaign (1 concept) Digital banner campaign (1 concept)
Email design Email design Email design
200,000 140,000 80,000

RETAIL CLOTHING BRAND BRAND IDENTITY ASSIGNMENT

EXPERIENTIAL AGENCY IN-STORE PROMOTION
OPTION 1 OPTION 2 OPTION 3

THE EFFECT OF ADDING A THIRD “PREMIUM” OPTION

RRELATIONSHIP
IINTEREST
OOPTIONS
LLEGITIMACY
AALTERNATIVES

KE
1. Always present at least three options (sometimes four, but never more).
2. Construct the options based on the main phases involved in the
assignment (such as discovery, development, deployment, etc.).
3. Give each option a benefit-oriented title (not just "silver, gold, platinum”).
4. Construct options using outputs (deliverables, specific work product) or
outcomes (target results) but never inputs (hours or assigned staff).
5. Given that the middle option is most often selected, make sure it contains
all the elements necessary to complete the assignment successfully.
KEY GUIDELINES FOR DEVELOPING OPTIONS

CONSTRUCTING OPTIONS
1
OPTIONS CONFIGURATOR
Objectives & Outcomes
2 Insights & Strategy
3 Solutions & Prototypes
4 Creation & Development
5 Production & Deployment
6 Analysis & Optimization
Option 1 Option 2 Option 3
CHOICE ARCHITECTURE IN AGENCY PRICING
OTHER OPTIONS ELEMENTS TO CONSIDER
Number of elements, versions, revisions
Degree of collaboration of other agencies
Speed of production
Reporting
Asset management
Contract and payment terms
IP ownership

Program Elements
Number and nature of program elements
Degree of customization
Number of versions
Number of revisions
Origination vs. adaptation
International versions, translations
Application to other channels
Use of specialized agency services
Insights Development
Secondary research
Primary research
Customer insights analysis
Strategic plans and briefs
Optimization
Pre-testing
Redevelopment and redeployment
Measurement
Analytics
Business intelligence dashboard
Data visualization
Coordination and Collaboration
Special presentations to client management
Special collaboration with other agencies
Tie-ins with other sponsors or programs
Hand-offs to internal agency
Level of access to agency talent
Implementation
Peak vs. off-peak production
Degree of client help or involvement
Embedding agency staff at client
Ability to offshore production
Digital asset management
Asset and data archiving
Contract Terms
Payment terms
Term and termination period
Indemnification and warranties
Clearance and legal services
Talent fee management
Rights management
Data security
Intellectual Property
Usage in other geographies
Usage in other media channels
Usage in non-advertising applications
Usage post-termination
MORE ELEMENTS
TO CONSIDER

NOT AN ESTIMATOR OF COSTS, BUT A
CHOICE ARCHITECT
Options
Versioning
Pricing Structure
Value Engineering

DYNAMIC PRICING
EQUITY
PROJECT POINTS
SUBSCRIPTION-BASED
OUTPUT-BASED
OUTCOME-BASED
FIXED PRICE OPTIONS
ROYALTIES
AGILE SPRINTS
USAGE-BASED
OUTCOME-BASED PRICING

$ PER CAR SOLD
IN NORTH AMERICA
Luxury Car Brand

$ PER PROCEDURE
Chain of Eye Clinics

$ PER QUALIFIED LEAD
B2B Brand

$ PER ROOM NIGHT BOOKED
$0.15 per room night booked,
up to 60MM nights
Minimum agency compensation
$0.25 per room night booked
beyond 60MM nights,
up to 70MM nights
Maximum agency compensation

MAJOR UNIVERSITY
Number of applicants
Number of campus tours
Number of dean interviews
Favorable awareness
Selected social media metrics

Corporate
Marketing Goals
50% Brand Relevance Rating
30% Core Preference
20% Product Mix
Weighting: 50%
GLOBAL TECHNOLOGY BRAND
Creative Testing
Rating score on 7 factors
Weighting: 20%
Agency
Performance
30% Factor A
20% Factor B
10% Factor C
10% Factor D
10% Factor E
10% Factor F
10% Factor G
100%
Weighting: 30%

“The agency offers
pay-for-performance
compensation: it gets
paid when an agreed-
upon business result
is achieved.”

KE
▪ Trust level. Do you have a high trust level with this client?
▪ Focus and patience. Are they able and willing to focus their time and
attention on a serious project that transcends the demands of the day?
▪ Understanding of brand success drivers. Does your client
understand what makes their brand successful?
▪ Senior client involvement. Will they give you access to C-level
executives for this process?
▪ Serious about accountability. Is your client willing to invest in their
own success?
THE RIGHT KIND OF CLIENT FOR
AN OUTCOME-BASED AGREEMENT

1. Agree on a framework
2. Identify Value Indicators
3. Set goals and weightings
4. Identify Value Inﬂuencers (optional)
5. Populate the Value Scorecard
6. Set a price and a Value Reserve
7. At the end of period, calculate the Value Score
8. Reconcile the Value Reserve
STEPS IN DEVELOPING AN
OUTCOME-BASED AGREEMENT

THE PRACTICES
—
DECOUPLING DIFFERENT
CLASSES OF VALUE

Production Distribution
Implementation
Strategy
Concepts
Insights
Analytics
Measurement
Optimization
THE SMILE CURVE
PERCEIVED VALUE
TO THE CLIENT

Strategic Planning
Ideation
Problem Solving
Production
Implementation
Distribution
Measurement
Analytics
Optimization
FLIGHT PLANNING PUSH BACK / TAXI / TAKEOFF CRUISING ALTITUDE DESCENT / FINAL APPROACH / LANDING

Design Build
Solutions Deliverables
Ideation Execution
MAGIC LOGIC
UNIT-BASED PRICINGCUSTOMER-BASED PRICING

DIFFERENT VALUE, DIFFERENT PRICING
A MULTI-YEAR EFFORT TO “DECOUPLE” IDEATION FROM IMPLEMENTATION
Goal: Simplify, standardize and optimize production
$100 million in “spend efﬁciency gains”
96% spend reduction in process versions
84% spend reduction in decision points
68% spend reduction in organization handovers

MAGIC LOGIC
UNIT-BASED PRICINGSOLUTION-BASED PRICING
“The easier it is
to quantify, the
less it’s worth.”
Seth Godin
Marketing and Business Author
“There is margin
in mystery.”

THE PRACTICES
—
MANAGE SCOPE
INSTEAD OF HOURS

DEFINING SCOPE
① Objectives
② Constraints
③ Risks
④ Project Structure
⑤ Role Deﬁnitions
⑥ Phases and milestones
⑦ Deliverables
⑧ Assumptions
⑨ Deliverables
⑩ Functional Requirements
⑪ Change Control Process
⑫ Approval Process

Using timesheets to manage
projects is like depending on
the smell of burnt cookies to
monitor the heat of your oven.

THE PRACTICES
—
ACHIEVING SUCCESS IN
PRICING DISCUSSIONS

Pricing transformation isn’t
about fixing procurement.
It’s about fixing us.

Agree on a price when you
have the most leverage.
PRICING DISCUSSIONS
THE PRACTICES

Value is always higher
before a service is needed
than after it is delivered.

Wherever possible, disrupt
the buying process.
THE PRACTICES
PRICING DISCUSSIONS

THE CHALLENGER
• Knows customer value drivers
• Oﬀers unique perspective
• Teaches the buyer a better way
• Is willing to politely push back
• Comfortable talking about money
Focuses on politely asserting control of the
process and pushing out of their comfort
zones by showing them a better way.
THE RELATIONSHIP BUILDER
• Focuses on building good relationships
• Gets along with others
• Likeable and genuine
• Accessible and generous with time
• Seeks collaboration
Focuses on resolving tension in customer
interactions to make situations more
amicable and positive.
13x more eﬀective

Signal early that your firm
takes a different approach to
pricing and remuneration.
THE PRACTICES
PRICING DISCUSSIONS

YES / NO / YES A BETTER WAY TO RESPOND
YES I understand what
you’re asking for.
NO That’s not how our firm
defines and sells value.
YES So here’s what we think would
work better for both parties.

“Unlike most other agencies, we don’t operate within a time-based
remuneration model. Instead, we provide a variety of pricing
approaches based on the value we create, not the costs we incur.
We believe that our clients, as marketing decision makers
accountable for business performance, should care less about how
many hours it takes us to do something and more about what we’re
ultimately delivering. This means that instead of tracking hours
and staﬃng plans, we devote our attention to tracking the outputs
and outcomes we create on behalf of your brand.
We recognize our model diﬀers from the guidelines set forth in
your RFP, and we would be happy to discuss our approach in more
detail as a next step in your process.”

THEIR PROCESS OUR PROCESS
Scope of Value before
Scope of Work
Identify and agree on
outcomes and outputs,
not inputs
Transparency of client
goals and expectations,
not agency costs

Never quote a price
on the spot.
THE PRACTICES
PRICING DISCUSSIONS

Always provide pricing
options, but never ranges.
THE PRACTICES
PRICING DISCUSSIONS

Package your offering
in a way that makes it
difficult to compare.
THE PRACTICES
PRICING DISCUSSIONS

Downsize instead
of discount.
THE PRACTICES
PRICING DISCUSSIONS

Negotiate something both
parties want to maximize.
THE PRACTICES
PRICING DISCUSSIONS

COST PRICE VALUE
SELLER’S PROFIT
(Agency)
BUYER’S PROFIT
(Client)

THE PRACTICES
—
ACTIVATING NEW PRICING
STRATEGIES IN YOUR FIRM

Packaging
Value
Effectiveness
Orientation
Pricing
Innovation
Professional
Selling
Proﬁt
Protection
Pricing
Professionalism
PRICING COUNCIL
THE SIX AREAS OF RESPONSIBILITY OF THE

SOME KEY INITIATIVES OF THE PRICING COUNCIL
Re-label documents with the language of value in place of the language of cost.
Create new “boilerplate” language for RFP responses, new business presentations
that focuses on value and outputs/outcomes instead of costs and inputs.
Recast the ﬁrm’s offerings as outputs and/or outcomes instead of inputs.
Develop templates for pricing options.
Establish a model for decoupled pricing.
Inject “Scope of Value” at the beginning of all scope documents, proposals, and
RFP responses.
Identify existing and potential IP for development as new revenue streams.
Create a metrics menu for potential outcome-based agreements.
Recommend and implement approaches for diversifying the ﬁrm’s pricing
portfolio.
Identify and track pricing opportunities with current and prospective clients.
1
2
3
4
5
6
7
8
9
10

1. We will begin each new assignment with an in-depth understanding of Scope of Value
before we execute a Scope of Work.
2. We will price our services based on the value we provide rather than the hours we work.
We will stop selling inputs and sell only outputs or outcomes.
3. We will diversify our “pricing portfolio” by developing and experimenting with different
pricing approaches, including varying levels of risk and reward.
4. We will trade our hourly rate card for a “pricing stack” — a variety of different ways we can
capture the value we create for our clients.
5. We will develop new revenue streams based on the intellectual property we create.
6. We will define scope not as hours worked, but as outputs delivered or outcomes achieved.
7. We will put our pricing in context by always offering options.
A VALUE MANIFESTO

Learning to apply
more creativity to
pricing is like learning
a new sport.
You get better and
better with practice.

TWilliams@IgnitionGroup.com
@TimWilliamsICG
linkedin.com/in/TimWilliamsICG
More about pricing at www.ignitiongroup.com

Progressive Pricing Strategies 2019

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