Pricing Wars - Agency/Client Dialog

This one, "The Vendor Client relationship - in real world situations", has been making the rounds. I've already heard from several colleagues that they've seen it and have even used it as part of internal, agency meetings. If you haven't viewed this, it will make you laugh and cry.



For any clients reading this: Please keep in mind that on the agency-side, we realize these are caricatures. And further, a spoof that could be produced on the many agency-side foibles related to pricing would similarly generate laughter and tears - (e.g. 2 weeks to generate a $10,000 high-level estimate).

However, determining pricing and managing expectations and scope as it relates to pricing are some of the most charged areas of agency/client relationships.

Like so much else in a partnership, clear communication up front and some organizational empathy can help avoid scenes like the ones depicted in this clip. Often issues surrounding pricing have more to do with poor communication and expectation-management than one party trying to pull something over on or unduly squeeze another - although there's certainly a bit of that floating around, especially in this pressured, economic environment.

A few things for all to keep in mind surrounding pricing include:

• It is impossible to tell how much time and money it will take to develop even a modestly complex project prior to receiving a proper brief. For a long range/complex project, even once the brief has been given and a broad solution determined, time & money can't necessarily be accurately predicted - and yes coming up with a viable, broad solution also takes time and money.
  
  
• The most accurate way to price a project is through sequential estimates that gain fidelity as insight is uncovered and actual phases of development approach. (See my posting: Letter of Agreement (LOA) - Getting paid from the beginning for more on this topic.)
  
  
• All parties need to understand that there are both activities and deliverable that need to be funded and that sometimes seemingly simple features and functions are very interconnected to other issues and take a lot of thought to execute effectively and efficiently - Right, like one of those Tiger Woods ads: 75% Preparation / 25% Execution.
  
  
• There is a wide range of variables that affect pricing of a seemingly simple scope of work, including: quality of briefing, state of assets, state of brand/style guidelines, condition of technical environment, timing pressure, client's internal structure/relationships and 3rd party involvement.
  
  
• Any agency worth its salt should be able to clearly articulate what is known and what is not known and the basis for their pricing.
  
  
• When bids come in with gaping discrepancies, more often than not, there are not shared assumptions about the scope of the project.
  

So, here's to hoping that collectively agencies and clients can bring "getting what you pay for" and "paying for what you get" a bit closer.

Client Management - The answer is, "maybe"

Successfully managing client relationships, especially in these pressured times, takes the combined efforts of skilled interactive agency professionals. More PM's have lost more hair (or at least their coloring to gray) hearing phrases like, "XYZ Account person told the client that, we could do "it" and still meet the schedule. S/He made no mention of a potential fee increases."

I have toiled, presented, implored, cajoled, collaborated and otherwise tried to influence agency Account people not to play the game of, "Client says, 'jump', we say, 'how high'?" or to look at the advice/insult another way, to stop being "yes-(wo)men" (I can assure any offended Account people that this is a mild characterization compared to those bandied about an agency - especially in the wee hours of the morning.) Among the many benefits of removing the instant, "yes" are that it would take some pressure off of the PM's, who invariable are vilified when they assess the situation and have to say, "no".

The aim is to migrate towards more of aconsultative answer of, "maybe". Ideally, towards an Account Management-response along the lines of, "Client, I understand the request, let me talk to superwoman-PM back at the office, see how we can address this. I will get back to you ASAP with a recommendation and let you know if there are any impacts to the project's scope, timing or pricing." This is not a bait and switch. It actually gives the agency some time to thoughtfully address the request and be fairly compensated if there is a legitimate change in scope.

When discussing this issue with a wise agency president, he suggested that one way to facilitate the migration of yes-(wo)men on the Account team to the maybe column was to also move the PM's to the maybe column. He posited that one reason PM's are often met with resistance or, worse avoidance, is that in their zeal to defend, PM's can become very problem-oriented vs being solution-oriented - effectively turning themselves into "no-(wo)men". If PM's reflexive response was also, "maybe, let's see what we can come up with", the partnership would benefit, friction diminished, and the ecosystem would be better aligned for success.

Pre-Managing Client Relationships

Here's a refreshing topic from Andreas Roell and Sarah Kotlova of Geary Interactive in the iMEDIA Connection newsletter: 6 reasons agencies want to strangle clients. Despite the reference to violence in the title (c'mon, we've all been there), their piece is about how to collaborate better with clients. They provide insights on how to work through issues that are endemic to a B2B service industry and ultimately form positive relationships with clients. Clearly Roell and Kotlova have been around the block a few times and offer some sage advice.

Their suggestions make reasonable sense. Unfortunately, the importance of logic and reason diminish in the relationship-success equation as issues heat up. In my experience, it is extremely difficult to address issues during or following flare-ups.

As a project management lead, I try to instill a preventive medicine approach with my teams. I like to conduct audits and assessments as part of the upstream Initiation and Definition phases of any project. Sessions in these phases usually cover expected and important topics like:

• defining objectives and strategies,
• uncovering insights about the target and competitors
• roles and use of relevant technologies

Importantly, we add an operational component, that seeks to establish the best working relationship between agency, clients and 3rd parties BEFORE and to AVOID strangling or being strangled. We define roles and responsibilities, establish review/approval cycle guidelines, and determine communication formats, processes and document-use (e.g. contact reports, status reports, change orders). Clients are very receptive to this early in a relationship or project and it pays dividends immediately.

Getting client engagements in a healthy place is critical when you're in the service business. Instilling this approach within an agency is important. Topics like this are perfect for running internal sessions with your teams. A simple exercise of breaking into small groups and throwing out a few, " What should you do if . . . " kind of scenarios and regrouping to share thoughts, generates lively interactions that help you guide the culture and personality of your agency - perhaps you'll find out that poison is better than strangling ; )

I applaud Roell and Kostlova for shining a light on these issues.

Update, May 2009: Topic rationally addressed by Bart Cleveland, Creative Director at McKee Wallwork Cleveland in AdAge.com - How to Manage Client Relationships in Perilous Times