An exploration of ways agencies can transform their approach to pricing, presented by Tim Williams of Ignition Consulting Group.

1. THREE WAYS TO TRANSFORM
AGENCY PRICING
STARTING TOMORROW
Presented by Tim Williams
Ignition Consulting Group

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

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

5. 1 2 3 4 5 6 7 8 9 10
STRONGLY DISAGREE STRONGLY AGREE
MODERN PRICING: WHERE ARE WE NOW?
Rating
1. Our client-facing teams have a good understanding of how the agency creates value and what
that value should be worth to our clients.
2. 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.)
3. We are willing to walk away from prospective clients who require us to disclose our costs.
4. We apply as much creativity to pricing as we do solving our clients’ marketing problems.
5. 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).
TOTAL

6. PROFESSIONAL BUYERS
OUR CLIENTS ARE

7. AMATEUR SELLERS
PROFESSIONAL BUYERS

8. THE PRICING
REVOLUTION

9. THE PRICING
REVOLUTION
DYNAMIC PRICING

10. THE PRICING
REVOLUTION
CONGESTION PRICING

11. THE PRICING
REVOLUTION
TWO-PART PRICING

12. THE PRICING
REVOLUTION
PAY NOW, USE LATER

13. THE PRICING
REVOLUTION
USAGE-BASED PRICING

14. 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

15. Three ways to transform your
pricing starting tomorrow.

16. Start charging for outputs or
outcomes instead of inputs.
THREE WAYS TO TRANSFORM YOUR PRICING STARTING TOMORROW
1

17. Paula Scher
Principal, Pentagram

18. 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

19. Inputs
Hours, time of staff
Outputs
Deliverables, work product
Outcomes
Results, effects
VALUE TO CLIENT
Visible to AgencyVisible to Client

20. 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

21. 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!

22. Start presenting a
“pricing stack” in place
of a rate card.
2
THREE WAYS TO TRANSFORM YOUR PRICING STARTING TOMORROW

23. 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

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

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

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

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

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

29. DYNAMIC PRICING
EQUITY
PROJECT POINTS
SUBSCRIPTION-BASED
OUTPUT-BASED
OUTCOME-BASED
FIXED PRICE OPTIONS
ROYALTIES
AGILE SPRINTS
GLOBAL HOTEL CHAIN
$.15 per room night booked
USAGE-BASED

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

31. AN EFFECTIVE INVESTMENT PORTFOLIO?

32. 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.

33. PRICING
ALL-STARS
“We have as many
compensation approaches
as we do clients.”
Eric Lear
VARIABLE PRICING
Employing varying pricing approaches based on
customer value instead of agency cost

34. VARIABLE PRICING
Employing varying pricing approaches based on
customer value instead of agency cost
1.Same store sales
2.Orders
3.Ticket size
KEY SUCCESS METRICS

35. “All of our pricing
approaches are experiments
in capturing value.”
Co-Founder Carl Johnson
VARIABLE PRICING
Employing varying pricing approaches based on
customer value instead of agency cost

36. INVESTMENT OF
FINANCIAL CAPITAL
INVESTMENT OF
INTELLECTUAL CAPITAL
VARIABLE PRICING
Employing varying pricing approaches based on
customer value instead of agency cost

37. Start presenting options
every time you quote a price.
3
THREE WAYS TO TRANSFORM YOUR PRICING STARTING TOMORROW

38. What if Starbucks offered
only one size of coffee?

39. Buyers need context in
order to ascertain value.

42. AIRLINE WEB DEVELOPMENT ASSIGNMENT

43. LIQUOR BRAND DIGITAL CAMPAIGN

44. 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

45. OPTIONS CONFIGURATOR
1 Insights & Strategy
2 Solutions & Prototypes
3 Creation & Development
4 Production & Deployment
5 Analysis & Optimization
Option 1 Option 2 Option 3
CHOICE ARCHITECTURE IN AGENCY PRICING
Pricing

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

47. CPOChief Procurement
Officer
PURCHASING AS A
CORE COMPETENCY
AT THE CLIENT
CPOChief Pricing
Officer
PRICING AS A
CORE COMPETENCY
AT THE AGENCY

48. THE PRICING COUNCIL
VALUE DELIVERYVALUE CREATION VALUE CAPTURE
Workstream 1 Workstream 2 Workstream 3
Redefining and repackaging
how the firm creates value
for its clients.
Implementing operational
frameworks that deliver
maximum value.
Dealing effectively with
professional buyers by focusing
on value instead of costs.

49. 1. 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.
2. We will trade our hourly rate card for a “pricing stack” — a variety of
different approaches for capturing the value we create for our clients.
3. We will diversify our “pricing portfolio” by developing new revenue streams
and experimenting with varying levels of risk and reward.
4. We will define scope not as hours worked, but as outputs delivered or
outcomes achieved.
5. We will put our pricing in context by always offering options.
A VALUE MANIFESTO

50. Negotiate
something both
parties want to
maximize.
COST PRICE VALUE
SELLER’S PROFIT
(Agency)
BUYER’S PROFIT
(Client)

51. TWilliams@IgnitionGroup.com
@TimWilliamsICG
linkedin.com/in/TimWilliamsICG
WELCOME TO THE PRICING REVOLUTION
www.ignitiongroup.com