IPA launch Billing vs Pricing Guide at Annual Business Growth Conference
Paprika were honoured to have the opportunity to sponsor this year’s IPA Business Growth Conference. It’s a renowned event, formerly known as the “Commercial Conference”, and our very own Managing Director, Nick Tomlinson, eagerly puts it in his planned time and attends each year. 2017 was no exception, and as the theme was all about aligning creative value with revenue, it got us giddy with excitement. This event marked the launch of The Value of Advertising, The IPA Guide on Billing vs Pricing, a resource which looks to “help agencies assert the value of advertising”, which you can purchase by clicking on the link.
Sarah Golding, IPA President, kicked off the conference and made no attempt to hide the fact that profits are at a record low for the ad industry. As such, the themes all circled around the difference between price, value and how to present it to the client with confidence. Here’s a few of our conversation highlights:
Who’s defending your value?
Tim Williams, Founder of Ignition Consulting Group, made reference to armies tracking costs but asks “who’s estimating, tracking and defending your value?” Although Paprika’s approach to pricing differs, protecting profitability is still part of what estimating and tracking costs is about. Estimating, tracking, and defending value, on the other hand, is somewhat ambiguous - how do you quantify value in order to measure and defend it?
We agree, in principle, pricing shouldn’t focus on the cost of what you do, but the value too. An idea perfectly depicted in this scenario:
“When buying a drill, are you buying a three inch drill or the expectation of being able to make a three inch hole after you’ve bought it?”
Tim believes that if you want to change the dialogue on pricing, you have to “change your language”. He recommends adopting the language of value in place of the language of cost. For example, injecting “Scope of Value” into proposal documents and rebranding your agency offering as “outputs” rather than inputs. In doing so, the client is encouraged to associate outcomes with value rather than cost.
He also says that pricing is a “competency” that gets better over time and we couldn’t agree more. Estimating and tracking costs over time leads to improved and more accurate estimating in the future – all aspects leading to increased profitability.
Tim represents a progressive approach to pricing and it gives Paprika food for thought. Another approach, perhaps, isn’t setting value based methods against cost based methods but encourages a dual approach throughout the agency. One which acknowledges that part of pricing, regardless of value, will still need to incorporate inputs and effort (like time).
“Yes sir” is a bad start
Speaker Blair Enns gave an empowering talk which encouraged sales teams to push back, challenge clients and have the confidence to say “no”. The owner of Win Without Pitching says “when starting negotiations, start with no and see what happens”. You can always “retreat” after. Which is true. Most situations are recoverable in sales negotiations and unless you aim for it, you’re unlikely to negotiate your dream deal.
So why do we find it so difficult to say no? Is it the overwhelming affliction to please clients which clouds our commercial brains? Fundamentally, saying no is OK. The customer is not always right and you don’t have to give aspects of your service, which create value, away for free just to satisfy a client. If you do, clients will only expect more for less. Which is a slippery slope.
It was a refreshing reminder that being nice and squishy can actually be damaging in the sales process. To win without pitching, agencies must command a mutual respect which will last long after the pitch is won.
“New business is a polite battle for control. If you can’t lead in the sales process you won’t ever lead after you’re hired” – great advice from the new-business legend.
Keith Hatter, CEO of PlanetK2, says that agencies need to “own the issue” when discussing commercial success. Training and championing commercial performance are key, but he highlights that “performance and results are connected, but aren’t the same thing”. For example, focusing on results doesn’t take into consideration what it took to achieve them. Shifting emphasis onto examining what drives performance will lead to enhanced performance and improved outcomes.
His other core message was simply to stop complaining.
“Complaining about clients is like swimmers complaining about getting wet”.
Procurement is another area that the industry has a tendency to complain about. Instead, Keith’s says agencies need to acknowledge them as a commercial reality and improve performance by working with procurement and investing in negotiation training for your staff – a much better mind-set than letting the big bad procurement wolves take a chunk of your profit.
Investment in negotiations training
Alan Smith of Scotwork, negotiation specialist, gave an insight into the “bargaining arena”, the “reality” and the "trade-off" needed to close the gap between what the client wants to pay and what you’re willing to negotiate.
Similarly to the earlier talk from Blair, the session served to remind us that strong negotiation skills are another string to your bow. Getting your people on course to hit profitability targets is down to what they negotiate.
Alan points out that agencies need to accept conflict is part of business. Part of the battle is overcoming that uncomfortable feeling when you don’t submit to the rising demands of a client. Instead, rationalise the process, decide what is up for negotiation, what’s not, and frame your offering to get the best deal for your business.
“You don’t always get what you deserve, you get what you negotiate”.
We know first-hand the impact of the Scotwork negotiations training, having invested in it ourselves, and thoroughly enjoying it too. We highly recommend checking them out.
It was a great conference, but of course many of these conversations started over a decade ago. As Keith Hatter highlights, until agencies “own the issue”, we could have the same “stop giving your ideas away for nothing” talk in another ten years – let’s not let that happen. Click on the link to find out more about The Value of Advertising, The IPA Guide on Billing vs Pricing.