To remain relevant — and profitable — agencies must regularly reevaluate their offerings to ensure they are optimizing the dynamics of the long tail of the advertising business …

Have you had the experience of signing up for an exciting new software product that, over time, kept adding so many features that the functionality which attracted you in the first place became buried in a sea of features that you didn’t want or need? This is the phenomenon of “featuritis,” and agencies around the world suffer from the effects of an unfocused business strategy …

When we look around the advertising agency industry for examples of truly transformative business models, most of these renovations are cosmetic at best. Agency leadership teams emerge from offsite planning meetings with pronouncements that the firm will undergo a “restructuring” that usually results in nothing more than a new website featuring yet more offerings tacked onto an already overly ambitious service set ...

If you’re building a business you plan to sell someday, to get maximum value, you must go well beyond the checklist provided by M&A consultants. Labor-based businesses like agencies can make poor investments because their main assets—client relationships and talent—can be fleeting. Acquisitions in other sectors usually come with more concrete assets—products, patents, licenses, and other forms of intellectual property ...

Click on the “Services” section of an agency website and you’ll be served with a bullet-point list of widely-available capabilities and competencies. The introductory copy explains that the agency will carefully assemble the right combination of services to meet the specific needs of prospective clients. This unimaginative approach to describing your firm makes it almost impossible for marketers to differentiate your firm from the “sea of sameness” that pervades the industry. …

Click on the “Services” section of an agency website and you’ll be served with a bullet-point list of widely-available capabilities and competencies. The introductory copy explains that the agency will carefully assemble the right combination of services to meet the specific needs of prospective clients. This unimaginative approach to describing your firm makes it almost impossible for marketers to differentiate your firm from the “sea of sameness” that pervades the industry. …

When you make the decision to implement a new revenue model in your firm, one of the essential first steps is to arm your front-line executives with the language and framework they need to sell in solution-based pricing to both clients and prospects. …

“If we complete a project in 30 minutes, it’s because we spent 10 years learning how to complete that project in 30 minutes. You owe us for the years, not the minutes.” These two sentences represent the very essence of the concept of pricing based on value instead of cost …

Most agencies walk into compensation discussions armed with a defense of their costs (spreadsheets populated with people and estimated hours) but have spent virtually no time or energy comprehending the value they’re about to create for their clients. It’s little wonder that the senior executives at most agencies are easy prey for the tactics of professional buyers in compensation and contract negotiations …

Let’s imagine that tomorrow you begin your business day confronted with a startling announcement in the business press: governments around the world have suddenly banned the use of hourly billing. Can you and your colleagues continue to run a successful business — like the agencies in the pre-timesheet era prior to the 1980s — or would your firm have to close its doors …

Can the same kind of "feature fatigue" made famous by over-engineered electronic devices apply just as well to a professional services firm? Absolutely, and it produces largely the same effects …

If this headline describes how you’re feeling about “value-based pricing,” this article was written especially for you. In the countless conversations our firm has had with agency executives about their revenue models, many have expressed this sentiment. But for those of us who teach value-led pricing, the most distressing comment we hear from agency professionals is, “Well, this all sounds good in theory, but …”

Do the executives on the front lines of your firm have a clear, unequivocal understanding of the principles that guide your commercial decisions? The progressive agencies that have a genuine understanding of the value they create have the confidence to follow specific rules of engagement during the process of setting and discussing remuneration …

Your firm has just done its very best work preparing a recommended marketing program and the response from procurement is “This is the most expensive proposal we have ever seen.” The problem, of course, is that your prospective client is telling the other agencies in the review the exact same thing …

After years of fervent discussion about the inadequacies of the time and materials approach to agency compensation, the industry is coming face to face with the fact that time-based billing is a useless concept when applied to problems that can be solved in nanoseconds by machine learning. …

It’s clear that agencies can benefit substantially from changing their revenue model. And on the client side, smart marketers realize that a healthy agency ecosystem is good for the entire industry. The money spent by brands on marketing will have a much stronger impact in the marketplace if their agency partners are staffed with bright, innovative people — well-paid professionals who are capable of creating exponential value for their clients …

Do the executives on the front lines of your firm have a clear, unequivocal understanding of the principles that guide your commercial decisions? By proclaiming your commitment to modern pricing methodologies, you are putting a stake in the ground that not only creates healthier margins but strongly differentiates you from the countless other firms caught in the commercial gridlock caused by hourly billing …

When you purchase a new car, you’re buying a professionally assembled product, not a list of components. It would be senseless to attempt to deconstruct the entire cost of a car in order to judge its value. Why, then, do agencies persist in selling components instead of finished products? Or worse yet, selling the hours required to build the components?

Persistent predictions of the imminent death of the advertising agency business have caused many industry executives to stop taking these prophecies seriously. No doubt our industry needs faster adoption of new digital technologies. But the real culprit is a decades-long trend of agencies doing more and more work for less and less money. To say that the current iteration of advertising agency business is on its deathbed is no exaggeration.

When it comes to pricing, knowing how to count is not nearly as important as knowing what counts in the mind of the buyer. Pricing is a judgment, not a calculation, and it must be done by people who can assess the value created, not compute the costs incurred …