IPA promotes value-based pricing models for agencies

The IPA has identified a half dozen key factors for agencies to consider when developing pricing strategies in a new white paper.

The Price of Success report was commissioned as a tool to help agencies overcome difficulties with the traditional Cost-Plus-Billing model which sees many trapped in a deadly pincer of shrinking fees and expanding workloads.

To escape this trap the paper recommends that pricing strategies be based on the value generated for the client rather than resources used by focusing on client needs above all else and matching that with specific activities, services and products offered.

Other pointers toward an agreeable pricing structure include proper value attribution for individual services, recognition of when it pays to be brave when taking on risks, the importance of trust in relationships and an understanding of whop owns pricing in commercial agreements.

Marc Nohr, chairman, IPA commercial leadership group and chief exec of Fold7 commented: “The traditional Cost-Plus-Billing model is becoming more and more inadequate as a way to account for the increasingly complex and diverse services that agencies offer and the true value of what they deliver to clients.

"That’s why we’ve commissioned, The Price of Success, which defines the challenges, competitors, complexity and commercial reality facing businesses and gives agencies a wide range of tools to better reflect the value they generate for clients. It will serve as an important handbook for our industry, driving forward the next wave of business growth for agencies.”

Earlier this year an IPA survey found that media agencies are continuing to grow while creative shops contract.