Marketing communications firms routinely make the mistake of assuming that “estimating hours” is the primary way of evaluating scope and assuring fair value for an assignment.  That approach falls far short of what’s needed to effectively price an assignment.

For starters, before rushing to Scope of Work, which is usually about deliverables, you must first define Scope of Value, which is about expectations and outcomes.

Following is an outline of questions and issues to consider when preparing an assignment valuation for a current or prospective client.

Scope of Value

The first step is to identify and articulate the outcomes this assignment is expected to generate.  While scope of value can vary greatly based on the nature and scale of the assignment, there are three main areas to consider:

Business-Related Outcomes
To what degree is this assignment expected to result in hard measureable outcomes?  This can include such indicators as sales, market share, market penetration, percent of full-price sales, average price per sale, incremental profit, etc. 

Marketing-Related Outcomes
To what extent is this assignment expected to produce what could be considered marketing-related outcomes, sometimes referred to as “intermediate” metrics?  These include inquiries, leads, store traffic, search engine rankings, web page views, purchase frequency, number of new customers, positive press coverage, positive online mentions, etc.

Customer-Related Outcomes
To what degree is this assignment expected to produce changes in behavior or attitudes at the customer level?  This could include such things as brand awareness, brand preference, intent to purchase, brand ratings, likeability of brand, would recommend to a friend, willingness to pay price premium, etc.

Desired outcomes can also be in other specific areas:

Channel-Related Outcomes
Average sale per dealer, dealer knowledge, dealer referrals, channel turnover, channel inquiries, etc.

Internal Outcomes
Employee product knowledge, internal brand adoption, employee satisfaction, etc.

Scope of Work

Next we need to articulate the specific scope of work involved in the assignment, including a detailed description of deliverables.  A good scope of work includes the following elements:

Assignment Summary
Write a brief description of the assignment.  If possible, describe the assignment in context of the client’s overall marketing program to show how it needs to fit in and integrate with other efforts or channels.  The assignment summary should also included selected key elements of what might appear on a creative brief, such as target audience description, competitive frame, etc.

Phases of Work
Outline the scope of the assignment in phases.  These phases will vary based on the channel, but here are general guidelines:

Possible Phases	Alternate Descriptions	PRINT	VIDEO	DIGITAL
Discovery	Assignment Audit, Brand Audit, Reputation Audit, Social Media Audit, Competitive Analysis, Secondary Research Review, etc.	*	*	*
Strategic Planning	Brand Planning, Strategy Development, etc.	*	*	*
Brief Development	Creative Brief Development, Content Brief
Concept Development	Creative Development	*	*	*
Channel Planning	Communications Channel Planning, Contact Planning, etc.	*	*	*
Schedule Development	Project Scheduling
Information Architecture	Site Architecture, User Experience Design, etc.			*
Specifications	Job Spec Development	*	*	*
Content Development	Content Creation	*	*	*
Prototyping	Prototype Development			*
Pre-Production	Video Pre-Production (includes talent selection, location scouting, etc.)	*	*	*
Production	Execution	*	*	*
Post-Production	Video Post-Production (includes transfers, editing, mixing, etc.)		*	*
Digital Pre-Press	Digital Imaging, Digital Retouching, Reproduction Materials, etc.	*
Duplication	Printing	*	*
Programming	Coding			*
Versioning	Version Development			*
Usability Testing	Interaction Testing			*
Staging	Hosting			*
Content  Management	Maintenance			*
Clearance	Legal Review, Network Clearance, etc.	*	*	*
Distribution	Message Placement, Channel Placement, Materials Distribution	*	*	*
Program Management	Project Management
Monitoring	Tracking, Analytics	*	*	*
Optimizing	Revisions and Replacement			*
Digital Asset Archiving	Archiving	*	*	*
Rights Management	Usage Rights, Talent Renewals, etc.	*	*	*

For each phase, list phase components with as much detail as necessary.

Note: A simple alternative way to organize a scope document is to follow the “7D” format for broad headings, with as many subsections as necessary:

1. Discovery
2. Definition
3. Design
4. Development
5. Deployment
6. Distribution
7. Debriefing

Timing

The development of the assignment should then be mapped as a timetable.  In the scope document this timetable should indicate major milestones only.  A detailed project schedule can be developed after approval of the assignment.

Example

Project Phase	Target Milestone
Discovery	April 1
Definition	May 1
Design	June 1
Development	August 1
Deployment	September 1
Distribution	October 1
Debriefing	November 1

Pricing the Assignment

Armed with a clear picture of both scope of value and scope of work, we are now in a position to price the assignment.  Here are the key questions to consider:

1. Allocated Budget
What is the client’s budget range for this assignment?  What have they historically allocated for this kind of work?

2. Resource Requirements
What resources (human, financial, and other) will be required to complete this assignment?

3. Level of Talent
What level of talent will be needed?  Does it call for our most experienced people?

4. Scope Management
How difficult will this assignment be to manage?  Do we anticipate relatively simple project management, or is this more complex in scope?

5. Time Sensitivity
Is this a rush assignment that will not only disrupt our workflow, but require late nights or weekends?

6.  Financial Impact
If this assignment succeeds in achieving its objectives, what will be the likely financial impact for the client?  Conversely, what is the client’s cost of not solving this problem?

7.  Strategic Importance
How important is this assignment in context of the client’s overall strategic objectives?  In the client’s value chain, is it high-value, moderate-value, or low-value role?  Does this assignment help create long-term value for the client, or is it essential tactical and short term?

8. Unique Qualifications
Is our firm uniquely qualified to perform this work, or could it just as easily be done by someone else?

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Pricing can be quoted as:

1. Fixed value price for each phase (may only be able to quote pricing for early phases at this stage)
2. Base fee for initial phases plus variable outcome-based fee for other phases
3. Fee tied to one or more metrics (multiple metrics should be weighted for importance)
4. Usage fee (with low or no fee for development)
5. Any creative combination of the above, or consider an approach that hasn’t been invented yet!

Pricing Options

The ideal practice is to always provide pricing options for the client.  This begins by thinking through three internal prices for the assignment:

• Reservation Price.  Below this price, the firm would turn down the work. It must get this price. It will generate a normal profit.
• Preferred Price.  The firm should get this price more often than not. It will generate an above-average profit.
• Premium Price.  This is an aspiration price, when the firm is adding extraordinary value. It will generate an exceptional profit.

Then consider the following nine-box model:

	Reservation Price	Preferred Price	Premium Price
Platinum Option	$	$	$
Gold Option	$	$	$
Silver Option	$	$	$

Using the pricing grid as a brainstorming guide, determine at which price the three options will be presented (obviously, not all nine prices are presented to the client). The upper boundary of these prices should be based upon the value being created, yet all will be lower than that value so as to ensure the client also earns a “profit”. For example, if you know the client is highly price sensitive, you may only present the Reservation Price for all three options. However, if there are some services that are adding marginal value, a Preferred Price may be quoted for the Gold and Platinum levels. If extraordinary value is being created, quote the Premium Price.

Pricing Format

Each major phase of the assignment should generally be priced separately.  This is to protect the agency in the event the client changes the parameters of the assignment, which can affect all subsequent phases.

Depending on the type of assignment, it may also be appropriate to break out the price as follows:

• Agency Services:  The total value of services provided by agency personnel and/or freelancers
• Outside Services:  The cost of services provided by outside business partners
• Out-of-Pocket Expenses:  Primarily travel expenses, shipping costs, etc.

Additional Value Levers

To help support the pricing, consider which of the following value levers would be appropriate to include:

Service guarantee
A service guarantee is written assurance that our client will be pleased with our services, usually stated as follows:

“Our services are guaranteed to the complete satisfaction of the client. If Client is not completely satisfied with the services performed by our firm, we will, at the option of Client, either refund the price, or accept a portion of said price that reflects Client’s level of satisfaction.”

Customized payment terms
For some clients, cash flow is sometimes more important than the price itself.  While we want to be firm on our price, we can sometimes be flexible and creative on the payment terms.  This overlooked strategy can make working with Agency more attractive.

Ownership of intellectual property
Rather than automatically granting ownership of all IP to the client (the standard “work for hire” approach), consider a lower price to develop the work accompanied by a higher price to use it.  The better the work (meaning the better the results), the more it will get used, the more the agency makes.  Good ideas are therefore worth more than bad ideas.

Independent Review
An independent quality review can be used in cases where there is perceived low-trust.  It can be worded as follows:

“Our firm subscribes to a policy of independent quality review to assure the highest caliber of work. As part of this program, all of the major services performed under this scope agreement will be reviewed by an outside marketing communications consultant under strict rules of confidentiality. The price for this review is included in the above professional services.”

Terms

Every scope document should include a standard set of terms (although these obviously can be modified to suit the needs of a particular assignment).  Here are the main items that should be considered:

Revisions
Specify the number and nature of revisions in each phase of work.

Contingency
Contingency language should be incorporated into all scopes where supplier services are anticipated, regardless of whether markup applies. Supplier services do not include freelance, which is included in the price, or OOP (out-of-pocket) expenses which are a pass-through to the client (such as travel and shipping). Possible language:  

“Outside supplier charges are subject to a plus-or-minus 10% contingency.  Agency will adjust the final billing based on actual supplier charges within this range.”

Pricing Assumptions
Make clear such things as stock vs. original photography, stock vs. custom music, etc. Also specify assumptions about third-party usage rights. Language such as this may be appropriate in some cases:

“This scope document and price is subject to revision based on Agency’s further understanding of the scope of the project as provided by the client.”

Potential Variables
Articulate any variables in the development or production of this assignment that could cause the price to go up or down. Use language such as:

“Additional costs that have not been included in this scope may include but are not limited to the items listed below.  Agency will notify Client in advance when additional costs will be incurred.”

Unanticipated Services
Suggested language for unanticipated services:

“If a need arises that is not anticipated in this scope of work, Agency will perform the additional work at a mutually agreed upon price before the service is provided. This service will be billed separately to Client, as part of a change order, and will be payable according to terms mutually agreed upon.”

Liability
Suggested language:

“Agency assumes no liability for items lost, damaged, or publication errors after Client has given final approval on the work.”

Confidentiality
Suggested language: 

“Agency and Client acknowledge that this scope document and discussions in connection therewith constitute Confidential Information.”

Pending Formal Agreement
In some cases you may want to stipulate the following:

“Work on this project is entirely contingent upon the parties entering into a formal Engagement Agreement, which set out the terms of ownership of all intellectual property created by Agency for use by the client as well as payment of Agency’s fees.”

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