Interviews, insight & analysis on digital media & marketing

Why AI means change for marketing agency pricing

By Tracey Shirtcliff, founder and CEO of SCOPE Better, a CPQ Platform designed for professional services

If you run an ad agency, you already know that artificial intelligence (AI) is changing everything. Business processes, data analysis, and creative  practices. Generative AI can be used for copywriting, image creation, and editing. It makes things faster, cheaper, and easier.  But it also means that your pricing model is about to be obliterated. Because I’m willing to bet that right now, you charge for your time. 

The death of hourly pricing

How can you justify billing by the hour when AI can carry out most of your work? You can’t. But nor can you cut your prices if you want to stay afloat. And AI isn’t just changing the way you do things, it’s changing the results you achieve. As well as adding speed, it allows greater accuracy, improving research and targeting. So, you’re probably delivering better results.  In fact, MIT estimates that generative AI can improve a highly skilled worker’s performance by 40%. And that is worth something to your business. The question is, how do you price it? And you’re not the only one asking that question. As of February 2024, 0% of firms have a plan for AI’s impact on their revenue model. 

It’s time to talk about value

At least 20% of all professional services firms will fundamentally change their revenue model in the next 3-5 years. And its beyond time. AI is driving a change that is long overdue. Because most clients simply don’t care about the amount of time you spend on their projects. All they want to know is the results. And that’s where value comes in. What are you actually giving your clients? It’s not the hours and minutes spent on campaign creation. It’s the clicks. The branding. The culture. The sales. The value. You just have to figure out how to quantify that value. 

Putting a value on value

When we talk about value in this context, what we’re really talking about is deliverables. So, you’re pitching for a client looking for a new product launch. Are you pitching the hours of each creative? The content designer, graphic designer, content manager, copywriter, PPC specialist, SEO leader, strategist, and all the rest? Or are you pitching a fully managed, comprehensive, multifaced ad campaign, with a TikTok takeover, multi-influencer engagement, and radio and television coverage? Which option is most appealing?  Which option says most to your client?  When you move in this direction, you begin to sell something that a client can understand and value.  And that’s what really matters. 

Right now, 35% of companies don’t possess the power to significantly raise their prices because they can’t prove their value. When you move to a deliverables-based pricing structure, you no longer have to. 

In 2017, it was estimated that AI could increase corporate profitability by 35% by 2035. It was an impressive figure then, but AI is becoming ubiquitous. It’s availability and uptake are far greater than imagined, even five years ago. So, that figure has to be viewed as conservative by anyone’s current estimation. Which means that marketing industry change is unavoidable. In both processes and prices. And now is the time to address the time vs value question if you don’t want your agency to be left behind.