The Agency New Business Blog


5 Things For Agencies To Know About Pricing Strategy

Posted by Mark Duval on Aug 25, 2022 8:15:45 AM
Find me on:


Agencies are facing a perfect storm of conditions, including rising costs, declining new business opportunities, and clients asking them to (once again) do more with less—despite stretched budgets and resources. 

Ironically, while many agencies feel pressured to reduce prices, they should raise them. The Drum has published accounts of agency leaders who have successfully navigated price increases with their clients, a reality the UK-based Institute of Practitioners in Advertising (IPA) recently said was “inevitable” due to inflation.

pricing strategy considerations for agencies amid downturn

How can agency leaders stand their ground on pricing and turn a potential point of weakness into a strength for their agencies? To start, get creative about options, get strategic about approach, and get planning to set your agency up for success with pricing.

Here are five pricing considerations for agencies:


1. Reducing prices devalues your creativity, and raising them again will be difficult after agreeing to cuts.

If you must reduce fees, minimize scope accordingly. When you agree to do more for less, you devalue your agency just as if you'd reduced rates. Learn more about why and how you should avoid devaluing your agency at all costs.

2. Apparently, your clients want to get out of the billable hour business even more than you do.

And not just because they want to lower costs. It’s mostly because they want to increase efficiency—and the billable hour rewards the opposite. That’s according to Tim Williams at the Ignition Consulting Group, who cites studies by the Association of National Advertisers which show that most Fortune 1000 companies “want to change the way they pay their agencies.”

Williams also believes its agencies that cling most fervently to the billable-hour model, noting that the brand marketers he’s spoken to “express enormous frustration regarding their agencies' unwillingness or inability to step forward with more productive remuneration models.”

3. To stop a race to the bottom based on the lowest price, shift the conversation to value vs. costs from the start.

This is much easier to do if you have a track record of proven results. See what proven results look like.

4. Study tips from experts on pricing strategy, pricing psychology and negotiation to regain control and optimize your outcomes in client conversations.

The first place I’d start is with the Ignition Consulting Group’s Propulsion Blog, authored by Tim Williams. If you’re looking for help negotiating with procurement, Mike Lander at Piscari is another knowledgeable resource.

5. The key to regaining control in pricing conversations is understanding where you can add value for clients.

It requires knowing what questions to ask to learn about their goals and the perceived value of having (or not having) what your agency brings to the table. Find questions to help with pain and value identification here.

Two years ago, the IPA’s Marc Nohr (also chairman of Fold7) warned that agencies are "colluding in their own demise" if they don’t evolve their pricing strategies. As dire and dramatic as that sounds, there is some truth in it.

The current conditions have put agency pricing back on the front burner for many agencies. What is your group doing to evolve its pricing strategy and fortify itself against devaluation?

Elevate your new business outcomes

Read more:


Image credits: Photo by Gl Co on Unsplash

Topics: Agency New Business

Recent Posts

New Post: