Art Of Value

Discover Value | Create Options | Start Pricing

  • About
  • Events
    • AOV Conference 2017
  • Podcast
    • Accountants
    • Bookkeepers
    • Creatives
    • Developers
    • Lawyers
  • Work Together
    • Coaching
    • Consulting
    • Speaking
  • Contact
The Magic and Logic of Pricing with Tim Williams

The Magic and Logic of Pricing with Tim Williams – 034

February 24, 2015 by Kirk Bowman 3 Comments

Tim Williams is a marketing professional with over 20 years experience in large agencies. He is the founder of Ignition Consulting Group and author of Positioning for Professionals. Tim is also a Senior Fellow at the VeraSage Institute.

http://traffic.libsyn.com/artofvalue/034-The-Magic-and-Logic-of-Pricing.mp3

Podcast: Download

Subscribe: RSS | More

Pricing Integrity

  • What is the most important thing you can share about pricing?
    • Stand your ground.
    • When you protect your pricing integrity, it makes the client want you more.
  • What is pricing integrity?
    • We only have our intellectual capital and integrity to sell.
    • If we violate that, it sends a strong message about how we work.
  • Is it lying to lower the price without lowering value?
    • Yes, then you are not providing your real price.
    • It is an issue of respect.
    • You can change the price if you remove things that contribute to the value.
  • Can you value price in China?
    • Everything is value priced in China, as you negotiate every price.
    • Some stores and markets have no price marked.
  • Do you recommend a trip to China to learn to value price?
    • It is an interesting wakeup call.
    • The jade craftsmen are paid per piece, so the more skilled they are at their craft, the more money they earn.
    • They price what the maximum value is to the customer.
    • Pricing principles and business practices can be cultural.

Value Pricing in Advertising

  • What is the status of value pricing in advertising?
    • After about 5 years of foot-dragging, the advertising agency business, finally, is aware that the billable hour model is sub-optimal.
    • Most firms are still pricing by the hour.
    • Marketing procurement folks are more enlightened on the customer side, but still purchase a staffing plan.
    • There is a 40-year decline in profitability in the agency business.
    • The client community (large advertisers) have been interested in value-based compensation for a long time.
  • Can value pricing scale in a larger agency?
    • There is a stronger imperative for a 700-person firm to abandon the practice as it eats up so much of their capacity.
    • Time sheet management accounts for 10-12% of the total energy of the organization.
  • Do you have to eliminate time sheets to value price?
    • You will be better at value pricing if you take away the time sheets.
  • How did you help Teehan+Lax switch to value pricing?
    • Tim showed Jon Lax examples of value pricing from agencies around the world.
    • As soon as you can change your mind, you can change your practices.
    • Time forecasting needs to be done in advance as a cost-accounting measure.
  • What is the first step for an agency to switch to value pricing?
    • Help them to understand how they create value for their customers, other than time, and how they can be compensated for that value.
    • You only get paid what you think you are worth.
  • What is the value of the Nike swoosh?
    • How would Wall Street value it? Billions?
    • It was created by a freelance college student for $35 and was almost overlooked as one of the options.
    • Real Beauty campaign for Dove by Ogilvy & Mather generated a 700% increase in sales in Europe.
    • When you decouple price from value, then you are unable to get paid for what you do.
    • Questions to ask:
      • What is the potential financial impact?
      • Is this about short-term or long-term value?
      • How uniquely qualified is our firm to complete this assignment?
    • Hourly rate assumes that everyone's talent and expertise is equal, which they are not.

Magic, Logic and Pricing

  • What is your concept of Magic and Logic?
    • Most professional firms are in two different businesses – magic and logic.
    • Magic is the high-level, strategic planning that a client cannot do for itself.
    • Logic is the execution – distribution, coordination, etc.
    • Logic is perceived as a commodity.
    • You can charge a premium price for Magic. It is better to unit price Logic.
  • Is it better for an agency to only do Magic?
    • Yes and that's what's happening. It is the ultimate solution.
    • Decouple your company. Create one Magic brand and one Logic brand. This is a trend.
    • Ideation vs. execution – companies are looking to hire separately.
    • Different pricing and cost structure for each company.
  • Why do you recommend using the word “value” instead of “cost”? (from Changing the Dialog)
    • Language is the precursor to behavior change.
    • Stop using the old language of cost and replace it with new terminology of value.
    • Replace “time” with resources.
    • Don't use the words estimate and cost with the customer.
  • How can you align economic incentives with the customer?
    • If you only have one thing in mind when pricing, it should be how to align the economic incentives.
    • To learn, take the concept of hours off the table with your next new client/assignment.
    • Engage your team to discuss how to create a win/win.
    • Creative agencies should be among the most creative pricers around.
  • What is the difference between “scope of value” and “scope of work”?
    • Scope of work outlines what is needed and when a proposal is requested.
    • It skips the expected outcomes, the scope of value.
    • Success workshop is a concept that has been adopted by some agencies as the first meeting with the client.
    • Don't charge for the success workshop, unless you are doing market research.
    • In the proposal, precede the scope of work section with a scope of value section.
  • What are a straight fee, a usage fee and a results fee?
    • Straight fee is a fixed price based on what it is worth to the customer.
    • Usage fee is being paid not for the creation of an idea, but for the use of the idea.
    • Results fee is a price based on outcomes.
  • What is your best story about creating value for a customer?
    • Full-service, integrated ad agency who didn't know what they stood for.
    • Helped them understand that they were great at digital lead generation.
    • Reconfigured their focus around that offering.
    • Since, they have a remarkable success story. They have grown to 300 employees, 5 offices and expanded beyond their local market to a national roster.
    • They decided to be best in class at something and that drove their success.

About Tim Williams

  • Website: Ignition Consulting Group
  • Blog: Propulsion Blog
  • Twitter: @TimWilliamsICG

Filed Under: Episodes, Positioning, VeraSage Tagged With: Creative agency, Positioning, VeraSage

Comments

  1. sandeep kaul says

    March 1, 2015 at 5:20 pm

    Great read !!

    Reply
    • Kirk Bowman says

      March 6, 2015 at 1:43 pm

      Thank you Sandeep!

      Reply
  2. Harihar Nath says

    May 3, 2015 at 10:32 am

    Good one and can be practiced to improve Value/Brand.

    Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Search

Email List

   Join   

Podcast

Subscribe

Copyright © 2023 · Centric Theme on Genesis Framework · WordPress · Log in