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Price vs. Value – Where to Draw the Line

June 29, 2016

Recently, a client came to me needing a referral for new service provider. While I happily passed along my contacts, I asked what made the previous relationship deteriorate so quickly. And here’s what I learned:

The client is billed on an hourly basis for communication and when certain projects arise, a separate project fee is established. No problem, right?

But here’s where things fell apart according to my client. The service provided for the agreed upon fee was a big disappointment. After requesting an adjustment to the invoice and explaining why they felt the work didn’t justify the cost, my client received significant pushback. Based on that — and that alone — the original provider lost the client. Lesson Learned – Price is only an issue when there is an absence of value.

The point of this article is not to reflect on all the things the original provider could have done differently, but rather, focus on how antiquated the agency billing system is and how clients are at a disadvantage as a result.

Most agencies (not all) have a billing system that involves some combination of hourly rates, project fees and retainer fees. The biggest challenges related to these options are:

  1. An hourly rate commoditizes the service provided. If the agency works too fast, they’re penalized through a lower fee. If they work too slow, the client is dissatisfied by a higher cost.
  2. Project fees put both the client and provider at risk if a project is over/under bid, leaving one or both parties disappointed.
  3. Retainer fees require a leap of faith by the client. The upfront investment is more significant, but the payoff is that both parties can relax and focus on the actual work and subsequent value delivered, rather than the time (or lack of time) spent on a particular detail of the project.

No system is perfect, but in an attempt to provide the most significant value to our clients, Paige PR encourages a retainer fee that outlines a certain level of support each month. We’re here to help our clients in any capacity, no matter if more time is spent advising rather than pitching stories or vice versa each month. I don’t want to be judged on the number of hours we provide; rather, we prefer clients feel as though the value they receive each month is appropriate for their investment. And while that means explaining our process thoroughly when creating proposals and taking the time to talk through our position, it’s worth it. We serve as our clients’ guide in the oil and gas industry and we want them to feel confident in our recommendations and as PR and marketing professionals. The value for us? The ongoing relationship, of course.

There’s obviously a lot more to add to this discussion, but we didn’t want to create a 2,000-word essay on billing systems. That being said, if you’re a client, sound off below with your concerns on working with the modern-day agency. And if you’re an agency, share your thoughts as well. We only get better when we COMMUNICATE!