This post takes up on some of themes introduced in the December 5th post, Achieving Balance in an Agency, where the value of certain agency activities and deliverables (e.g. a breakthrough idea) was examined.
Value-based pricing is not a new idea, but it's a good one that has been in place for a long time in the consulting and pharmaceutical manufacturing arenas among others. Many agencies and clients are stuck in the familiar worlds of commission-based or hours/labor-based compensation. At their worst, these approaches encourage reach-oriented (i.e. tonnage) marketing programs, support running up the clock to justify billable hours and perhaps worst, crush innovation and performance.
The barriers and risks to adopting this approach are not insignificant and include:
- Agency and client comfort/momentum in doing things the way they've always been done.
- Having enough influence on an overall program so that the value you envision and agree upon with a client can actually be created.
- Clearly defining success and therefore value (raise your hand if you've been part of a view-through debate)
- Determining pricing so that nobody loses their shirt and the agency doesn't miss out on the upside.
So, what does this have to do with Project Management? In a study that Ignition and VeraSage conducted on behalf of the American Association of Advertising Agencies (AAAA) and the Association of National Advertiser's (ANA), the 2, top-rated agency value-drivers according to marketers were:
- Working in a collaborative way with the client by creating an environment of mutual respect.
- Ensuring that agency functions are integrated and agency divisions collaborate on behalf of the client
Speak up. Watch out for the tar pits!