How you price and package your services will ultimately determine how successful your agency is, so you need to get it right. Download the full Nail Your Pricing Strategy ebook here to get an in-depth look at value-based pricing and the tools that you can use to implement this pricing strategy: http://hubs.ly/y0Ff0z0

2. Most agencies struggle to earn decent and
consistent profit margins.

3. They often also wrestle with pricing…which is at
the root of the problem.

4. …But each day that you avoid nailing your pricing strategy
is another day you keep your agency from growing at a
desired pace.

5. If you’re like many agency owners, you might
say, “how I price depends on…”

6. If you’re like many agency owners, you might
say, “how I price depends on…”
• Agency Resources

7. If you’re like many agency owners, you might
say, “how I price depends on…”
• Agency Resources
• How desirable the client is, and why

8. If you’re like many agency owners, you might
say, “how I price depends on…”
• Agency Resources
• How desirable the client is, and why
• What the client needs to be successful, and if he’ll pay
what that costs

9. If you’re like many agency owners, you might
say, “how I price depends on…”
• Agency Resources
• How desirable the client is, and why
• What the client needs to be successful, and if he’ll pay
what that costs
• How hard you have to work (client politics, purchasing,
etc.)

10. These are all important
factors…

11. These are all important
factors…
But they aren’t the best factors on which
to base your pricing decisions – or to
choose clients.

12. We believe it’s time for a change in how
agencies price their work.

13. We
believe
that
the
right
price
is
based
on
the
value
the
client
gets
from
the
results
of
the
work
you
deliver.

14. Why?

15. Why? Because value is your common ground.
Your client wants value for his
investment. And so do you!

16. Getting to value-based pricing from where you are now
can be a lot of work.
But the end result is well worth it.

17. It’s a journey filled with creating successful
partnerships that are mutually beneficial and
profitable with the right clients.

18. First, let’s talk about how agencies have
traditionally priced their services.

19. Most businesses start by charging for their
products and services based on their costs.

20. Knowing your costs is vital to understanding
your profitability.

21. Knowing your costs is vital to understanding
your profitability.
But the problems start when you base your
price on costs.

22. Cost-based pricing sets you up for an
adversarial relationship with your clients from
the beginning.

23. So
what
is
cost-­‐
based
pricing?

24. So
what
is
cost-­‐
based
pricing?
It’s
a
method
for
determining
your
selling
price,
and
it’s
rela@vely
simple.

25. You calculate what it costs to produce your product or
service, set desired margins, add those margins to your
costs… and there’s your price.

26. Over the years, agencies have seen cost-
based pricing evolve into 3 different models.

27. 1
Opaque Pricing

28. 1
Opaque Pricing
This pricing gives client little to no visibility
into what and why an agency charges what
they charge.

29. 2
Billable Hours / Line-based Pricing

30. 2
Billable Hours / Line-based Pricing
Agencies who use this model often have a
price sheet that shows the hourly rate each
service or line charges (e.g. creative, media,
workflow/programming).

31. 3
Fixed Package Pricing

32. 3
Fixed Package Pricing
This is another menu-driven option, but
instead of an hourly rate, it’s tied to
producing a specific number of deliverables
within a set period of time. These are sold as
one-off packages or in time-based retainers.

33. Download the full
Nail Your Pricing Strategy
ebook to learn more about transitioning
your agency to value-based pricing
here:
DOWNLOAD NOW

34. Ultimately, these cost based pricing models can be
vicious traps. You open the door for clients to
challenge you on…

35. Ultimately, these cost based pricing models can be
vicious traps. You open the door for clients to
challenge you on…
“Why do I need
blog posts,
wouldn’t PPC
be better?”
Expertise

36. Ultimately, these cost based pricing models can be
vicious traps. You open the door for clients to
challenge you on…
“Why do I need
blog posts,
wouldn’t PPC
be better?”
“Why should
producing an
ebook take 20
man hours?”
Expertise
Efficiency

37. Ultimately, these cost based pricing models can be
vicious traps. You open the door for clients to
challenge you on…
“Why do I need
blog posts,
wouldn’t PPC
be better?”
“Why should
producing an
ebook take 20
man hours?”
Expertise
Efficiency
Personnel
“Why use Ann
to design when
she costs more
than Steve?”

38. Ultimately, these cost based pricing models can be
vicious traps. You open the door for clients to
challenge you on…
“Why do I need
blog posts,
wouldn’t PPC
be better?”
“Why should
producing an
ebook take 20
man hours?”
Expertise
Efficiency
Personnel
“Why use Ann
to design when
she costs more
than Steve?”
Quality
“Stop using
stock or custom
photos, just use
Creative
Commons.”

39. All of which puts you in a tug of war with your client.

40. Enter…

41. Enter…
Value-based pricing.

42. This is a method that quantifies your
agency’s value in ways a client can relate to
his profitability.

43. Once you understand your client’s context (their
goals, challenges, capacities, etc.), you’re able
to attribute your efforts to specific outcomes
which directly relate to profit.

44. There’s a formula you can use to
calculate your retainer costs based
on value.

46. To do this calculation, you need two
data points from your client.

47. (LTV)
Average Customer Life Time Value
and
(M-CAC)
Marketing Customer Acquisition Cost

48. LTV is the estimated revenue that an
average customer will generate during the
entire span of his relationship with your
client. LTV helps you gauge the maximum
amount he should be investing in marketing.
10% of LTV

49. Precisely how LTV gets calculated depends
upon your clients business model – but
here’s a simple formula you can use to
estimate their LTV:
10% of LTV

50. 10% of LTV

51. LTV is a good pricing metric to use when
your client wants to reduce her overall
marketing costs and still maintain her current
growth rate.

52. The second data point is M-CAC which is
total marketing cost divided by the number
of customers acquired over a specified
period of time.
M-CAC

53. For example, if your client spends $300,000
on marketing in a year and adds 30
customers that same year, then M-CAC is
$10,000
M-CAC

54. M-CAC

55. M-CAC is a good pricing metric if your client
is not looking to save on marketing expense,
but rather is trying to accelerate growth.

56. Recap

57. Recap
10% of LTV is a good pricing metric to use when
your prospect wants to reduce his overall marketing
costs and still maintain his current growth rate

58. Recap
10% of LTV is a good pricing metric to use when
your prospect wants to reduce his overall marketing
costs and still maintain his current growth rate.
M-CAC is the pricing metric to use when company
growth, and using marketing dollars more
effectively, is the goal.

59. Now you’re ready to calculate your
retainer cost!

60. To learn more about how to transition
your agency to a value-based pricing
model, download the full ebook
Nail Your Pricing Strategy.
DOWNLOAD NOW