An exploration of progressive pricing strategies for agencies and other professional service firms, presented by Tim Williams of Ignition Consulting Group.

1. HACKING AGENCY
COMPENSATION
Presented by Tim Williams
Ignition Consulting Group
www.ignitiongroup.com

2. WHICH LEVER SHOULD YOU PULL?
VARIABLE COSTS
REVENUES
PRICING
A 1% improvement (reduction) in variable costs will improve profit by: 4%
A 1% improvement in volume (revenues) will improve profit by: 7%
A 1% improvement in pricing will improve profit by: 11%
Fixed Costs
Variable Costs
Volume (Revenues)
Pricing
A 1% improvement (reduction) in fixed costs will improve profit by: 3%
PROFIT
IMPROVEMENT
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3. COSTING
THE COST TO THE SELLER
Requires the expertise of production
and finance professionals
A CALCULATION
PRICING
THE VALUE TO THE BUYER
=
A JUDGMENT
Requires the expertise of
pricing professionals
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4. A PRICING REVOLUTION
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5. A PRICING REVOLUTION
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6. A PRICING REVOLUTION
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7. A PRICING REVOLUTION
PAY YOUR AGE
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8. A PRICING REVOLUTION
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9. A PRICING REVOLUTION
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10. A PRICING REVOLUTION
TIRES BY THE MILE
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11. A PRICING REVOLUTION
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UNINTERRUPTED
FLYING TIME

12. A PRICING REVOLUTION
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13. COMPETITOR-BASED
Penetration Pricing
Skim Pricing
CUSTOMER-BASED
Solution-Based
Value-Based
WEAK
Pricing
Competency
MODERATE
Pricing
Competency
STRONG
Pricing
Competency
PRICING
PRACTICES
COST-BASED
Cost Plus
Hourly Billing
PRICING
PARADIGM
PRICE TAKER
PRICE FOLLOWER
PRICE MAKER
THE (R)EVOLUTION OF PRICING
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14. KNOWLEDGE
WORK
MANUAL
WORK
COST-BASED
Time Spent
Cost of Labor
Cost Plus
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15. The only place “time spent”
should matter is in prison.
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16. 1. Whose job is it to change agency pricing strategies and
compensation approaches?
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POLL QUESTION
A. The industry at large — all agencies must agree together
B. Advertising and marketing associations like the 4As and ANA
C. The marketers who hire agencies
D. Each individual agency

17. SELLERS ROUTINELY RE-EDUCATE BUYERS
ABOUT PRICING IN ALL TYPES OF MARKETS
Software
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18. SELLERS ROUTINELY RE-EDUCATE BUYERS
ABOUT PRICING IN ALL TYPES OF MARKETS
Airlines
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19. Professional Services
SELLERS ROUTINELY RE-EDUCATE BUYERS
ABOUT PRICING IN ALL TYPES OF MARKETS
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20. Not a fair fight
Agency-side sellers and
client-side buyers
An even match?
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21. THE WORLD OF THE
PROFESSIONAL BUYER
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22. Why amateur sellers
are vulnerable to
professional buyers
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1. We fail to establish value up front.
2. We focus on defending costs instead of proving value.
3. We are willing to reduce price without also reducing value.
4. We believe all price challenges are real.

23. Not a fair fight
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12 PRACTICAL WAYS
AGENCY PROFESSIONALS
CAN BEGIN HACKING
COMPENSATION CHALLENGES
STARTING TODAY

24. Outcomes
Results, market effects
Outputs
Deliverables, work product
Inputs
Hours, time of staff
©Ignition Consulting Group
Sell your value
instead of your costs
1
DRIVEN BY
UTILITY TO
THE BUYER
DRIVEN BY
COST TO
THE SELLER
INPUT-BASED PRICING
OUTPUT-BASED PRICING
OUTCOME-BASED PRICING
Move the dialogue
away from inputs
to what clients
really buy: outputs
and outcomes.
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25. Trade the language
of cost for the
language of value
A change in language
is a critical precursor to
a change in behavior.
LANGUAGE OF COST LANGUAGE OF VALUE
Cost
Estimates
Hours
Rates
Billable Time
Labor
Utilization
Time of Staff
FTE’S
Price
Talent
Results
Solutions
Outcomes
Results
Value
Metrics of success
Accountability
2
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26. Align the parties’
economic incentives
Instead of a discussion
about who gets the biggest
slice of pie, show how you
can grow the entire pie.
3
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27. 2. We begin every major assignment with a
discussion of “Scope of Value” (expected
outcomes) before we discuss Scope of Work.
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A. Always
B. Most of the time
C. Sometimes
D. Rarely
E. Never
POLL QUESTION

28. Focus on transparency
of expectations in place
of transparency of costs
Guide your client to
focus on “Scope of
Value” before getting
to Scope of Work.
4
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29. Attach different
pricing to different
classes of value
Proactively decouple
your high and low
value services.
5
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30. Put your value in
perspective by
offering options
Options provide context
for the value you’re
providing and change
the dialogue away from
inputs to outputs and
outcomes.
6
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31. Diversify your
compensation
portfolio
Just like a personal
financial portfolio,
diversifying your
compensation portfolio
produces higher returns.
7
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UNIFORM PRICING
Cost-based calculations based on
a formula that creates a self-
imposed ceiling on profit
VARIABLE PRICING
Employing varying pricing approaches
based on customer value; create many
more opportunities to capture profit

32. Apply the same
creativity to pricing
as you do to solving
marketing problems
Once you take
hourly billing off the
table, there are
virtually unlimited
ways to get paid for
the value you create.
8
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33. Always provide pricing options,
but never ranges.
9
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Never quote a price on the spot.10
Never, ever lower your price
without also stripping out value.
11
Formalize pricing as a function
separate from costing.
12

34. CPOChief Procurement
Officer
PURCHASING AS A
CORE COMPETENCY
CPOChief Pricing
Officer
PRICING AS A
CORE COMPETENCY
PRICING COUNCIL
AT THE CLIENT AT THE AGENCY
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35. ESSENTIAL ROLES OF THE
PRICING COUNCIL
Identifying and championing the multiple dimensions of value
the firm creates for its clients.
Experimenting with various pricing approaches to maximize
profits and diversify the firm’s pricing portfolio.
Developing tools that will keep the firm focused on value
instead of cost, including changing the language.
Overseeing the development of pricing options and presenting
pricing proposals to current and prospective clients.
Creating new revenue streams by cultivating, packaging and
monetizing the firm’s intellectual property.
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36. NEGOTIATE SOMETHING BOTH
PARTIES WANT TO MAXIMIZE
COST PRICE VALUE
SELLER’S PROFIT
(Agency)
BUYER’S PROFIT
(Client)
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37. SHARED VALUE
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38. INFLUENCER
TWilliams@IgnitionGroup.com
@TimWilliamsICG
linkedin.com/in/TimWilliamsICG
Presented by Tim Williams
© 2017 Ignition Consulting Group, Inc.