How the demise of the billable hour will affect agency roles…
Agencies typically price projects based on number of hours to be spent.
Tim Williams is a well known pricing specialist who has been telling agencies why this doesn’t make commercial sense for years.
Tim believes agencies need to urgently adopt a new revenue model if they want to survive.
Here are a handful of soundbites – but I’d urge you to listen to the full episode here:
- Cost is a calculation, price is a judgement – pricing should be ‘top down’ not ‘bottom up’
- Pricing starts with the question ‘what’s the potential value to our client of what we’re about to do?
- Have a diversified pricing portfolio with varying levels of risk and reward
- We need to define the ‘scope of value’ before we execute on what the client thinks they need – this requires a much better in-depth discussion about what does success look like, what are the success metrics related to this project?
- Always provide options, never a single price, never a yes or no but a choice of ‘yeses’ – 3 is the magic number, sometimes 4
- Adopt the ‘challenger sale’ mindset i.e. push back politely and show your clients a better way….
…. And lots more!
Tim shared his predictions for the agency business model of the future.
My question was:
“If agencies stop charging hours and charge for outputs and outcomes instead, which roles will be most affected?”
Tim’s response:
“Scope doesn’t equal hours, it equals work completed/milestones met/deliverables done. If you’re selling products and programmes the project manager’s job is greatly simplified and you’ll need fewer project managers and the job will be more fulfilling”
