Comments on: Value-Based Fees: What Are You Going to Do?

By: Value is a matter of perception. | Standing Out From The Crowd

Value is a matter of perception. | Standing Out From The Crowd — Thu, 07 May 2009 16:50:08 +0000

[...] the agency and the client’s perspectives (see the post that originated the discussion and the follow-up post, both by @ginidietrich from Arment Dietrich [...]

By: Lorne Fisher

Lorne Fisher — Fri, 01 May 2009 13:53:36 +0000

Gini, couldn’t agree more! Our discipline must be valued by the c-suite and the only way to earn that respect is focusing on what matters to them – driving business!

By: Dan Wallace

Dan Wallace — Fri, 01 May 2009 00:15:00 +0000

We strongly believe in value-based fees. In fact, that is a core part of our offering. Because we do strategic and operational performance improvement, growth in free cash flow is the right metric. It’s still tricky. What is the appropriate baseline from which to measure growth? Still, it creates such powerful alignment of interest that it is worth striving for.

As Gini points out, PR is intangible, so it’s much tougher. I suggest structuring the value-based fees around specific, concrete outcomes (whatever you control and they can measure) so that there is no post-hoc question whether you achieved them or not. It may be easy to agree on the value of an additional bag of pet food, but you can’t prove whether you delivered it or not. There are reasons why the client wants you to do what you’re going to do. The *VALUE* of your work exists only in the client’s eyes and is hidden in those reasons. Explore them in depth and get the CLIENT to explain the value to YOU, not the other way round. Then you have the context for a deal.

By: Dave Van de Walle

Dave Van de Walle — Thu, 30 Apr 2009 20:03:24 +0000

I remember back in the startup days, late 90s, when there was quite a valid pro/con discussion about agencies working for stock options. It came back to the same sort of deal — some were against it, must be hourly or project base, couldn’t do that; some were for it, great idea, we share in success with you.

Skin in the game is nice, measurable results are nice — agreed upon targets are best.

By: Brad Farris

Brad Farris — Thu, 30 Apr 2009 19:31:49 +0000

I like the options. The truth is that the client determines the value of our work regardless of what we charge for it. So agreeing with them about what they are going to charge for it is the only way to have both sets of expectations align. Make a deal, then continually touch base to keep everyone on the same page. Change as often as needed to keep everyone aligned.

By: Liz

Liz — Thu, 30 Apr 2009 14:36:46 +0000

A lot of those solutions really resonate, particularly the point about understanding business goals vs. PR goals. The best thing that can come out of a very well considered pay-for-performance model is that both client and agency have to analyze and really understand their activities in the context of the business… which will in itself focus everyone’s time more effectively and make campaigns more successful.

By: Adrian @adriandayton

Adrian @adriandayton — Thu, 30 Apr 2009 14:31:42 +0000

Great post, a number of attorneys mentioned to me that billable hours is the only way for litigation to be run. I think that is kind of a lazy excuse, here in your post you give some great possible alternatives. Clients like alternatives and benchmarks, I think they motivate those doing the work- and manage the expectations of the client.