A revolutionary pricing model for agency and client relationships is needed to secure the future of the advertising sector, according to membership body the IPA which believes that too much emphasis is still placed on time-based models.
In a year of industry disruption, the IPA has released the ‘Price for Success’ report which aims to offer alternative and more sustainable commercial models for its members.
Created by marketing advisory Alchemists and overseen by the chair of the IPA’s commercial leadership group, Marc Nohr, Group Chief Executive of Miroma and Chair of Fold 7, the report offers a new model based around eight core commercial components and will allow agencies to access six key pricing factors which they can score themselves and their clients against.
A process and framework to create appropriate pricing for agency products and services and real questions answered by member agencies are also included too.
Claiming to offer ‘the most advanced approach to how to price agency services,’ the recommendations focus on a move away from cost to an up-front deal to a result-based transaction valued around output.
The innovation imperative
Writing in the report, Nohr said: “Innovation in the way agencies price their services has lagged behind the innovation shown in the products and services they offer.”
He went on to question the use of timesheets as a measurement tool and the continued trend by agencies to drive down their prices without identifying any operational efficiencies.
“Unless agencies face up to the many and varied challenges they face commercially and change the way they price their products and services, they are colluding in their own demise. This report gives them the tools to skill up, get good at it, and ultimately secure their own future,” stated Nohr.
Adding his hope that the new guide would help agencies adopt a more agile process, Vlad Komanicky, founding partner of Alchemists said the advice would enable the building of partnerships with clients and understand the state of their relationships.
“By identifying this, they will know where they stand in terms of the potential risks and rewards for any commercial partnership,” said Komanicky.
The document has been released to build on a paper released in 2019 on pricing while showing agencies that they are “well set-up” to evolve their current models.
