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 …

In the agency business, your clients don’t buy ingredients, they buy increased market share, improved brand reputation, or a seamless customer service experience. Professional proficiency in core areas is the foundation of what you sell, but your clients are paying for a finished product, not an assemblage of qualifications …

Hourly billing produces a soul-crushing culture. But it’s in your power to change it. If you lead or manage a professional services firm, you can redirect the internal narrative away from “be efficient” to “be effective.” The result among your fellow professionals is nothing short of transformational …

Next time your client tells you the objective of a campaign is “sales,” politely insist that you engage the agency client-team in a more thorough exploration of what constitutes success. This will help transform a transaction-based relationship into one guided by a shared commitment to achieve clear marketplace results …

Have you finally buried the billable hour? If you’ve joined the pricing revolution, your firm is enjoying the benefits of a modern revenue model that generates profits in ways that have nothing to do with hours logged on timesheets. But your operations and finance teams may still be insisting that time tracking is required to effectively manage internal resources …

There will come a time (sooner than we think) that the billable hour will completely disappear from the world of professional services. If you’re currently employed by a firm in the marketing services business, this is likely to happen within your lifetime. Here’s how to proclaim the change to your associates, your prospects, and your clients …

It's true that the hourly rate still dominates the compensation structures of the most professional services firms around the globe. But the seeds of its dismantling are being sown, in some unexpected ways from unexpected sources. Many of us who study the topic believe it's now just a matter of time until the hourly rate is properly laid to rest in the graveyard of bad business ideas …

Is marketing a profession? This is actually an important question for people the businesses like advertising agencies. Many practitioners feel that because they have devoted their careers to this discipline, they are “professionals” in the sense that they know their jobs well and take their work seriously.

If discussions about agency compensation seem like a circular conversation, it’s because most firms are debating the wrong thing. Clients will always try to steer the discourse to focus on cost. Your job is to present and defend the value you’re creating for your client’s business.

Grow or die. It's embedded in the capitalist psyche. But is there such a thing as "bad" growth? Or more to the point, "bad" profit?

Should you aim high or low when a client asks you to “guesstimate” the price of a project? Most of us know the answer to this question, and it’s thanks to the world of behavioral economics that we have insights into the principles of pricing psychology.

If you want the attention of an agency leader, manager, or department head, you’ll have to wait until they get a break in the action from the latest new business pitch. In agencies of all types and sizes, new business presentations are all-consuming.

In clinical trials of new drugs, pharmaceutical companies have learned some fascinating lessons in behavioral science. Not only is the placebo (essentially a sugar pill) perceived as effective by a surprisingly large percentage of patients, but the power of suggestion produces other intriguing effects.

Advertising agencies are facing competition from every dimension and direction. Upstream, they complete with marketing consultancies and brand strategy firms who seek to provide planning and strategy services to marketers. Downstream are production companies, independent freelancers, and even media companies who now aim to not just sell media but produce content.

Has your firm turned the corner on agency compensation? Many agency executives insist they have, pointing to the fact they have negotiated better hourly rates, better retainers, or better terms on cost-plus remuneration agreements. The problem, of course, is that they are simply getting better and better at doing the wrong thing.

When asked to provide an inventory of services provided by your firm, most agency leaders supply the type of list that begs the question, "Could anyone agency actually do all that?"

The gravest sin committed by marketing communications professionals is their tenacious tendency to sell services instead of solutions. A bullet point list of capabilities is hardly the most effective way to frame the value you create for your clients.

There is a cardinal belief in professional services that our inventory is not parts, but people. If that’s true, professional firms are facing unprecedented inventory shortages. Competition for the best people has always been fierce, but is now intensified by the economic impact of a global pandemic.