Our industry is going through rapid change, but can our revenue and billing models stand up to the challenge? Money is a complex discussion, which can cause contention amongst agencies and clients but now, more than ever before, agencies need to pause and look inwards. In a landscape where competition is high, client budget cuts are a given, return on investment (ROI) is mission critical, and procurement drives the request for proposal (RFP) process, business can still be won – but often at a price that is not sustainable.
Does this mean it’s a losing battle for agencies? Not at all. Believe it or not, clients are not the bad guys (well, mostly). They’ve got their own existential crisis brewing and, hence, are expecting more from their agency relationships. But more does not always mean “discounted by the kilo”; more can mean adding value in totally different ways. It could mean strategic integrated thinking, campaign solutions that deliver measurable results, efficient pricing where they get more bang for each buck through agency innovation, and a pricing model that is sustainable and scalable for both the agency and the client. In essence, they are looking for partners and, with that, value.
However, there is no doubt that the agency pricing models of today are unsustainable. If clients are driven by value and ROI, then agencies will need to shift their focus too, which means adopting some form of compensation model that is more realistic and can ensure that agencies continue to invest in people and growth. At least for the short term this model will more than likely be a hybrid of fixed fees and performance results.
Improved technology and data tools make value compensation a lot easier to measure today. So will more clients demand this pricing model and pay us at least partially based on value results? Before we even consider such a model, though, we need to ask a few questions. How do we define success in a way that is fair to the agency, while delivering ROI for the client, because some of these results could depend on factors such as client strategy and market conditions? How does that affect our operational model and agency structure? Do we outsource some tasks to save operational costs so we can focus on our core competence and really address the client requirements more efficiently? Do we hire a different type of skill set – not just task-related skills, but also a more entrepreneurial mindset? And do we have all the answers yet? (That last one was a rhetorical question.)
It is also vital to tap into trusted client relationships and seek their opinion. What keeps them up at night? How can we help them better? How can we help them make a better case for our services and thus secure the required budgets? These are just some of the many things we need to consider while finding a workable solution. The one thing we know for sure is that evolution is vital for survival. And size will not matter, nor will the number of powerful dragons breathing fire in your wake, in this game of thrones. What will matter is how agile you are, how quickly you can implement changes, and how fluid and scalable your skills and organisation’s structures are.
