This post was originally published in November 2016 and has been updated for comprehensiveness. If you’re making the shift to value-based pricing, join us for the live and on-demand series Point Pricing for Agencies.
I spent the first six years of my marketing agency career chasing hourly quotas instead of results. Our goal was to bill a minimum of five hours per day.
Yes, we cared if the client was happy and successful, but the fundamental economic driving force behind the firm's existence, and my career potential, was the billable hour.
I discovered early on that the billable-hour model was a flawed, archaic, agency-centric system that wrongly tied agency performance to outputs, not outcomes.
In 2004, four years into my career, I became highly motivated to build a more efficient and profitable solution that shifted the focus to client needs and goals.
The idea was centered on making services tangible with clearly defined costs, features and benefits, almost like buying a product off a retail shelf or signing up for a software service.
My theory was that if clients understood exactly what they were getting, and agreed ahead of time what it was worth, then we could remove the mystery from the equation and focus on delivering value and results.
The problem was that the billable-hour model was the only one I had ever known. How would I build an entirely new financial model and productize a service business?
>> If you’re getting started with value-based pricing, check out the 12 Questions to Guide Your Marketing Agency Pricing Model Transformation.<<