In the creative services industry, price can be a taboo subject. No one wants to talk about pricing and with good reason. First of all, value is subjective because the thing being sold is intangible. Second, there is the awkward idea of profit. Agencies are in business to make a profit after all. And no one likes the idea of their needs being profitable for someone else.

We have uncomfortable conversations about pricing way too often. They are never easy. They are never fun. But it’s become clear that many companies view outsourcing creative work as perilous. So, we decided it was time to talk openly about pricing and costs. The goal here is not to defend our pricing. Rather, we want to facilitate trust with prospective clients through transparency. Likewise, we hope to offer clarity to businesses looking to work with an agency to help them understand how to budget for that work.

Agency-Client Collaboration: The Ideal Approach to Budgeting

When budgeting to outsource creative, marketing or advertising work, the best approach is to partner with an agency to help estimate the work. Over the years, we’ve engaged with many clients in this way. In some cases, the client gives us a list of goals or deliverables for the coming fiscal year, and Porchlight estimates the work for budgeting purposes. Other times, a client will give us a budget and a list of needs and ask for our help in prioritizing or working through different estimate scenarios.

In an ideal world, this is a great place to start. It creates an open relationship between client and agency, one where both parties put their cards on the table and commit to working together. When a client commits all their work to an agency, there’s more room to negotiate price than with a single project. When clients and agencies work in open collaboration, there are fewer surprises. And fewer surprises are a benefit which everyone can share. 

Hourly Rates Are Unreliable for Budgeting

One of the most challenging aspects of outsourcing for clients is understanding value. Suppose you don’t have an agency with which to partner. Suppose you are shopping around for a new agency, a bigger agency or a multidisciplinary agency. How do you know if you’re getting fair value? How do you know if you’re shopping for the right agency for your needs and budget? 

There’s a world of providers that live in the space between Madison Avenue and the freelance market. They vary by size, specialty and experience. For the most part, they all have an hourly rate. While it’s tempting to view hourly rates as a standard unit of measurement by which to compare providers, it’s only effective if everything is equal. That’s hard to know. In other words, hourly rates should only be used to compare individual freelancers offering the same service or competing agencies delivering a limited scope of work.

At Porchlight, we are looking forward to the day when we no longer have conversations around hourly rates. After all, there is little we do that fits into an hour. Everything we estimate includes the services of a multidisciplinary team of designers, writers, developers, etc. Everything we estimate is complex in scope and includes an end-product designed to deliver value to our clients. If you are looking for an agency with a certain hourly rate, we may not be the right partner for you.

Our ideal clients are those that need multidisciplinary support, such as marketing strategy and execution or product line reviews and visual merchandising. The hard conversations happen when clients want to hire us for single-service projects and want to pay single-service (a.k.a. freelancer) rates.

The Pros and Cons of Using RFPs to Control Project Costs

A common way to budget for outsourced work is through a request for proposal. An RFP often begins with a scope of work sent out to competing agencies. RFPs tend to place an emphasis on price, tempting reviewers to skip to price and overlook important attributes like process, team and contingencies. RFPs work well for certain projects where the scope is common, such as in web development or branding. In such cases, the comparison is much like comparing apples to apples.

But RFPs can be tricky for projects where the scope involves a certain understanding to develop or is a first-time project for a client. Video is a good example wherein you almost need a video partner to write the scope of work to produce a video. Without experience, you may not know to include provisions for equipment, talent, music, etc. As a result, you may select a proposal and choose a partner that has the lowest price but then have to pay for a lot of extras.

The Value of Retainers for Ongoing Marketing and Creative Work

A lot of clients are reluctant to use the R-word. But there are a couple of situations in which retainers make a ton of sense. First of all, retainers are ideal for ongoing creative needs over a period of 12 months or longer. Think of social media marketing, website management and content marketing as examples. A retainer buys you a team to manage that activity, consistently and with minimal management.

Likewise, retainers also make sense if you need to outsource work regularly. Retainers allow you to guarantee time and reserve certain teams in anticipation of the work. This may not include routine activities. It may simply be the way you execute your annual marketing plan. However, these relationships can be challenging for clients that have a hard time initiating the work, either because of organizational friction or time management. Retainers are like any relationship, they require work on both sides. We have a responsibility, along with our clients, to make sure retainers are entered into with full awareness of the risks.

Packaged Pricing Helps Streamline Value and Eliminates Uncertainty

A new category of pricing that you’ll see across the spectrum of consulting is packaged pricing. Packaged services bundle activities, outputs and costs. An example would be marketing strategy or a brand audit. A package for marketing strategy could include a competitive audit, audience analysis, buyer journey workshop, outputs and playbook. A merchandising package might include packaging creative, in-store POP and ecommerce assets.

Packaged services typically include a standard scope of work, timeline and outputs for a fixed fee. The benefit of this offering is that clients know they are getting the same deal as everyone else. Meanwhile, agencies benefit from the elimination of awkward conversations.

Open Conversations Lead to Better Pricing

The bottom line – which is the point of all pricing conversations – is that shared transparency leads to pricing that works for both clients and agencies alike. When clients come to us with a budget and ask what we can deliver, they get a response that includes everything we know we can do well for that price. There’s no obligation, just honest pricing. Regardless of the budget size, when clients are open about their circumstances, we spend less time negotiating and more time working.  

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