Today we’re hearing from Chris Simmance, Founder of The OMG Center, and a Digital Agency Coach with over 10 years experience working in and leading digital marketing agencies, for his advice to digital agencies on Time Selling vs Valued Based Pricing.

Ah, the eternal conundrum of the digital marketing world: to bill by the hour or to charge based on the value you deliver? It’s a bit like choosing between a sturdy umbrella and a fancy raincoat in British weather. Both have their merits, but one might just save you from getting drenched in the downpour of undervalued work.

This quandary brings to mind the wisdom of Harry Beckwith in “Selling the Invisible,” a tome that’s more or less the Holy Grail for those of us trying to market something you can’t drop on your foot.

So, let’s chat about moving from the safety of clock-watching (a bit dull, right?) to the thrilling world of value-based pricing. It’s not just about changing how you bill; it’s a whole new way of seeing your work. Beckwith’s insights teach us that what we’re really selling isn’t our time; it’s the outcome of our labours, the difference we make to our clients’ bottom lines.

Imagine, if you will, a world where your pricing reflects the sleepless nights spent brainstorming, the eureka moments in the shower, and the sheer magic you work to boost your clients’ online presence. That’s value-based pricing. It’s about linking your fees to the success you bring to your clients, rather than how many hours it took you to do it. This approach not only gets you closer to your clients, aligning your victories with theirs, but it also stamps a big fat “worth it” on your forehead (metaphorically speaking).

Now, don’t get me wrong; shifting gears isn’t as simple as flipping a switch. It’s a bit like trying to convince your Nan to switch from her beloved flip phone to the latest smartphone. There’s comfort in what we know, in the familiar hum of the hourly rate ticking over. But the rewards of making the jump to value-based pricing are as satisfying as a warm scone slathered in clotted cream.

The “Opportunity Cost” of Time-Selling

In “Selling the Invisible,” Harry Beckwith explains ‘opportunity cost’, for digital agencies. It’s about what you might be missing out on as a digital agency by sticking to the age-old practice of billing by the hour.

Imagine you’re running a digital marketing agency. You take on a project to boost a client’s online presence, estimating it’ll take about 100 hours, with payment based on those hours. The project’s a hit, sales for the client soar, but because you’re tied to hourly billing, your reward doesn’t quite match up to the success you delivered.

It’s like throwing a party that everyone’s talking about, but only getting thanked for the invites. That’s opportunity cost staring us in the face, reminding us of the extra value and client appreciation we’re missing out on.

Here’s another scene: Your agency is the epitome of efficiency, cutting down project completion times without cutting corners. Paradoxically, in the hourly billing universe, being faster means earning less, which hardly seems fair. It’s akin to being penalised for scoring a goal too early in the game. This outdated billing method not only limits your revenue but also dampens the incentive to improve and innovate.

This is where Beckwith’s wisdom comes into play, advocating for a shift to value-based pricing. Instead of billing for the hours spent, this approach focuses on the impact of your work. It’s about the significant sales boost your project brought about, not the number of hours it took to get there.

Value-based pricing aligns your agency’s success with your clients’, where you’re rewarded for the outcomes, not the input. This fosters a partnership where clients are invested in what you achieve together, not how long you spend on it.

Adopting value-based pricing is more than just a financial decision; it’s a strategic move towards recognising and leveraging the real value of digital marketing services. It’s about acknowledging the broader impact of your work beyond the ticking clock, encouraging a more sustainable and growth-oriented approach.

The Principles of “Value-Based Pricing”

Imagine this: You’re not just flogging SEO services by the hour like they’re going out of fashion. Instead, you’re crafting a masterpiece, a package that’s set to skyrocket a client’s online presence and, more importantly, their sales. This isn’t about counting pennies based on the effort; it’s about the value you’re adding. It’s like saying, “Forget the hours; let’s talk about how we’re going to make your business shine and share in the success.” It’s not just revolutionary; it’s a game-changer.

Now, let’s chat about the nitty-gritty of value-based pricing. It’s all about getting under the hood of what your client really values. What’s their endgame? Where do they see their challenges, and how does success look on their horizon? By zeroing in on these points, you’re not just meeting expectations; you’re blowing them out of the water. And in doing so, you’re not just setting a price; you’re defining the value of your partnership.

This approach isn’t just about the numbers; it’s a psychological masterstroke. Clients start to see their investment not as a bottomless pit of billable hours but as a clear path to achieving their goals. They’re no longer buying time; they’re buying outcomes, which, in the grand scheme of things, is a far easier pill to swallow. It’s about making the intangible, well, tangible.

Value-Based Pricing For Your Team

But what about the team behind the magic? Here’s where it gets even better.

This isn’t just about making the clients happy; it’s a morale booster for the team, too. Knowing that their hard graft is directly linked to tangible results for the clients turns the daily grind into a mission. It’s no longer about clocking in and out; it’s about making a difference. And that is where job satisfaction and excellence start brewing.

So, drawing from Beckwith’s wisdom, we see that value-based pricing isn’t just a way to slap a tag on your services. It’s a philosophy, a way of life, if you will. It’s about recognising the true essence of what we do and the value it brings to the table, both for our clients and for ourselves. By adopting this approach, we’re not just changing the game; we’re setting a new standard, one where success is a shared journey, and the price of admission is the value we bring to the party.

Improving Operational Efficiency through Value-Based Pricing

Value-based pricing – not just a strategy, but a transformational force, ready to shake the very foundations of digital marketing agencies!

The Quest for Streamlined Project Management

Diving headfirst into value-based pricing is like suddenly realising that your clients aren’t just buying your time; they’re investing in outcomes that sparkle. This realisation isn’t just an “aha” moment; it’s a game-changer for how projects are run.

It means projects get a new lease of life, becoming more about hitting those home runs rather than how long you’re up at bat. With clear goals from the get-go, your team becomes a well-oiled machine, picking the right strategies and tools without wandering down time-consuming dead ends.

And here’s the kicker: constant nattering with your clients. Not just idle chit-chat, but meaningful conversations that keep things on track and make clients feel like they’re part of the team. It’s like having a GPS for project management – you always know where you’re headed, and so do they.

Welcoming New Tech Like Old Friends

Tech – the trusty sidekick in our tale of value-based pricing. To truly embrace this approach, you might need to buddy up with new project management tools and CRM systems that get what you’re trying to do. These aren’t just tools; they’re your envoys in the land of efficiency, helping you plot out goals, keep tabs on progress, and really get under the skin of what your clients are after.

Training your team to wield these tools with finesse is crucial. After all, what’s the point of having a supercar if you don’t know how to drive it? Equipping your squad with the know-how to use these systems is like giving them a map to buried treasure – the “X” marks the spot where value meets efficiency.

Implementing Value-Based Pricing

Now, onto the meat of the matter: making the switch to value-based pricing. It’s not just about changing your price tags; it’s about changing mindsets.

Unearthing Your Services’ True Value

First up, you’ve got to dig deep to uncover the gold – the real value your services offer to clients. It’s not just what you do; it’s the impact of what you do. This might mean having heart-to-hearts with your clients to really understand what makes them tick (and what ticks them off).

Singing Your Value From the Rooftops

Once you’ve got your treasure trove of insights, it’s showtime. Communicating your value to clients isn’t just about listing benefits; it’s about telling them a story where they’re the hero, and your services are their trusty sidekick. Customising this narrative for each client ensures the message hits home.

Packaging Your Services Like Christmas Morning

Lastly, putting together service packages that reflect value-based pricing is like wrapping up a gift. It’s not just about the bow on top; it’s about what’s inside the box. These packages should cater to various client needs, with transparency about how each element brings them closer to their goals.

Effective Time Management for Service Delivery

The fine art of juggling the sands of time in the ever-evolving world of service delivery. Let’s embark on a little adventure through the winding paths of effective time management, shall we? Imagine we’re navigating through the foggy landscape of “Selling the Invisible” with our trusty guide, Harry Beckwith, whispering words of wisdom about the value, not the volume, of time.

Turning Time into Treasure

In this realm where time bends and stretches, our mission is to transform it into something of value. It’s not about how long we toil but the magic we conjure in those moments. Setting sail with clear destinations (objectives, if you will) for each project allows us to chart a course where every second counts towards dazzling our clients. It’s like choosing the most enchanting spells to cast, ensuring each one is potent enough to make a real difference.

The Technological Wand

Now, no modern sorcerer is complete without their wand – in our case, technology. These aren’t just tools; they’re extensions of our very essence, enabling us to bend time to our will. Project management platforms become our crystal balls, giving us glimpses into the future, showing whether we’re on the path to victory or veering into the unknown. And let’s not forget our familiar spirits – automation tools and CRM systems – each playing their part in weaving spells that charm and delight, personalising each encounter with our clientele.

The Golden Chalice of Value-Based Pricing

Here lies the treasure we seek: the golden chalice of value-based pricing. Harry Beckwith’s tome hints at a world beyond the drudgery of hourly rates, a realm where our efforts and their outcomes are in perfect harmony. This is no mere fantasy; it’s a place where satisfaction and revenue dance in the moonlight, celebrating the alignment of investment and reward.

A Tale of Two Benefits: Revenue and Satisfaction

Imagine, if you will, an SEO agency, once lost in the forest of fixed fees, discovering the path to value-based pricing. They start charging not for the hours they toil but for the rankings they elevate, the traffic they summon. And lo! The clients, seeing the direct link between what they pay and the growth of their dominion, are filled with joy and gratitude. The agency, meanwhile, finds its coffers swelling, its bond with clients strengthened by this shared journey towards success.

Banishing the Beast of Stress

In this new world, the spectre of stress, with its hourly billing and unpredictable costs, is but a shadow of the past. Clients, secure in the knowledge of what they’re paying for, place their trust in their agency champions. And the agencies themselves? They revel in the predictability of their income, free to plan, to dream, to grow.

Remember: managing time in the service of value is not just about efficiency; it’s about creating magic moments that linger in the memory, crafting stories of success that are told and retold. It’s a journey of transformation, for both agency and client, towards a future where every second is a step towards something spectacular.

Navigating Challenges and Resistance

Navigating the choppy waters of change, particularly when it involves shifting to value-based pricing, can feel a bit like convincing a cat to take a bath – not impossible, but it requires a fair bit of strategy, persuasion, and perhaps a treat or two at the end. Let’s embark on this journey together, drawing inspiration from the wisdom of “Selling the Invisible” and the world of service marketing strategies.

The Fine Art of Client and Team Education

First off, we’re talking about a bit of an educational crusade here. You see, resistance often stems from a place of misunderstanding or fear of the unknown. It’s like telling someone who’s only ever driven an automatic car that they’re switching to manual – there’s going to be a bit of a panic.

But just as you’d explain the benefits of having more control over the car’s performance, outlining the advantages of value-based pricing to both clients and internal teams can help ease those fears. It’s about showing them how this shift isn’t just good news; it’s great news, with a capital G. Sharing tales of triumph, where this model has led to improved outcomes and happier clients, can turn sceptics into believers.

Embarking on a Pilot Voyage

For those encountering a sea of resistance, consider setting sail with a smaller crew first. Opting for a pilot project or selecting a handful of clients to test the value-based waters allows everyone to dip their toes in without the pressure of a full plunge. It’s like a trial run for a new recipe – if the dish turns out to be a crowd-pleaser, you’re more likely to cook it for the big family gathering. These early successes can act as your beacon, guiding the rest of your agency and client base towards the promised land of value-based pricing.

A Symphony of Strategy and Communication

The journey to value-based pricing is, at its heart, a blend of visionary strategy, clear and compelling communication, and an unwavering commitment to delivering undeniable value. It’s about grabbing the bull by the horns, facing challenges head-on, and using insights from the likes of “Selling the Invisible” to light the way. This path may not always be smooth, but the rewards at the end – increased client satisfaction, higher revenue, and a distinctive competitive edge – are well worth the trek.

Final Thoughts

Stepping into the world of value-based pricing isn’t just a change in billing; it’s a profound pivot towards aligning your agency’s heartbeat with the very pulse of your clients’ needs and expectations. This alignment is what sets trailblazers apart in a marketplace that’s as crowded as a London tube during rush hour.

Venturing towards this model demands a mix of introspection and innovation, requiring agencies to peel back the layers of their service offerings and examine the core impact of their work. Beyond the spreadsheet, it’s a narrative of value, impact, and partnership.

A pivotal aspect of implementing value-based pricing is accurately calculating the cost of your time while ensuring a healthy gross margin — ideally exceeding 75%. This financial prudence ensures that your agency not only remains profitable but also has the capacity to invest in innovation and growth.

Selling the service as a value-based package allows for this profitability to be maintained while delivering exceptional value to clients. For agencies uncertain about how to undertake this calculation or transition to value-based pricing, expert guidance on how to take your digital agency offering to the next level, is invaluable.

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About the Writer

Chris Simmance is The Agency Accelerator, a Digital Agency Coach with 10 years of leadership experience who knows how to get things done. With a no-bs approach to all things, he helps cut through the noise and get to the solution that works for you.