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News & Views

Solving the pricing issue and where to look for the answers

by Miles Welch
Insights
|
27th November 2018
Solving the pricing issue and where to look for the answers, post image

I wasn’t sure if it was the difficulty of the topic or the sub-zero room temperatures at a conference I attended yesterday, but the conversation seemed to ignore any kind of introspection. The advice shared by the room was not conclusive, nor particularly original (get paid for the quality of your deliverables). Although, there was some merit to the discussion, I did reflect afterwards on why some businesses feel price and margin pressures when for others it’s less of an issue.

Taking the audience of predominantly creative businesses, it’s possible that pricing issues are a result of increased competition and the ‘state’ of the market. But sometimes businesses need to hold the mirror up against themselves and reflect on how much they are to blame for the issues they face.

It’s easy to blame Brexit, the economy, your competitors and indeed we have seen the impact on our client’s clients, who have supply chain aspects to what they do, suffer in recent months of uncertainty. It can also become a convenient get out of jail card. Take Jamie Oliver and his restaurant chain where poor choice of locations and the subsequent closing of units was blamed on Brexit long before Brexit was having an effect.

However, reflection and introspection is needed. Pricing pressures from clients have always been around, it’s not new. Some clients feel it more than others, why? One agency I worked with around 7 years ago felt this too. Shrinking margins and pressure on the rate card were the first signs, then came the blame: the market, Google, client’s taking work in-house. Anywhere but themselves.

Actually, what was apparent was that their business model was in decline. They were becoming commoditised; undifferentiated and unclear in what they were, the problem they solved and who they solved it for. It’s easy to become a shopping list of services and an operational model that has fallen behind what they were now offering the marketplace, (without even seeing it happen).

Where one client can be flourishing, it’s often because they are relevant and in demand, but also in a state of near constant review:

  • Are we working smartly?
  • Are we efficient?
  • Is there a better way of doing this?

These businesses think differently, have a growth mindset and are agile. They see in-housing as an opportunity:

  • What does the client need?
  • Can we supplement where they are weak and back-off where they are strong?

They see rate discussions as an opportunity to engage and show value.

One agency I worked with was asked to make a 10% reduction to the rate card. They negotiated an increased volume of work from the brand’s local agencies and ended up with a more solid relationship and no chipping of the fees.

There’s no panacea, but a little self-analysis is often a way to get to the answer.

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