Agencies Push For Value Pricing Over Time-Based
One trend that's been bubbling around in agencies for some time now might, aside from its other important benefits, may result in the elimination of the most dreaded operational activity: filling out time sheets. In recent history, following the shift from old-school 15 percent compensation, agencies have based revenue on the time it takes to complete a project mapped against the cost of hours to accomplish the project. There was then a shift to performance-based marketing that tied campaign performance to agency revenue. Now, the notion of value has been added to the compensation equation with several agencies, including Crispin Porter + Bogusky and Anomoly, setting fees based on the perceived value of the work they do for clients.
CP+B's Jeff Hicks tells Advertising Age, "We're in the intellectual-property business. We don't sell time." Davis & Gilbert's Ronald Urbach furthers explains, "The discussion is beginning to shift from 'What does it cost to generate work and services a client wants?' to 'What is the value of the services and materials the agency is creating for the client?"'
While the notion of value pricing is certainly not new, it is getting more play. However, it's going to be a difficult, uphill battle to convince cost-conscious, cost-cutting clients to view agencies more as true business partners than expendable "vendors." Time will tell. Unfortunately, our money is not with the agencies on this one.