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Value-Based Compensation Program

Ignition works with marketing communications firms to help them adopt the compensation approaches based on the value they create rather than the hours they work. Making this transition requires a change in thinking as well as a change in practices. This program therefore begins with a combination of both onsite and online training sessions.

In addition to educating the senior management team, Ignition often recommends that firms establish what we call a “Chief Value Officer” or a group of individuals called the “Value Council.” This helps establish pricing based on value (vs. estimating based on costs) as a core competence of the agency. Much of our work with the firm is focused on helping this individual or group deploy new pricing and compensation practices within the organization.

Drawing upon Ignition’s extensive work in value-based compensation, including work with the AAAA, ANA, IPA, and agencies worldwide both large and small, we provide training, coaching, and advice in the following areas:

How and why the current system must change

Why agency income is headed in the wrong direction
The chronic disadvantages of cost-based pricing
Why the current client-driven system is not in the client’s best interests

The economics of value in agency-client relationships

Improving agency profitability by improving your pricing instead of just cutting your costs
Trading a focus on internal measures and costs for a focus on external measures and value
Aligning the economic incentives of agency and client
Scarcity mentality vs. abundance mentality

How agencies create value and why they should get paid for it

Why all profit is derived from risk
What business agencies are really in, and what clients really buy
Why agencies are ultimately a client’s most important business partnership
The financial impact of agency contributions
Selling your value instead of your costs

The principles and practices of value pricing

The value continuum
The critical importance of dealing with the economic buyer
Pricing individual services based on value instead of cost
Selecting the profit-optimizing price for each engagement or service
The argument for different prices for different clients at different times
Issues to consider in responding to Request for Proposals (RFPs)
Dealing with client price psychology and how to overcome pricing objections

Creativity in compensation

Applying agency creativity to pricing
Separating the value of ideation and execution
Tiered pricing for agencies
Creating new sources of agency revenue, including developing your own intellectual capital

The critical importance of putting “scope of value” ahead of “scope of work”

Tools for clarifying Scope of Value
Identifying the drivers of brand success
Evaluating the value of outputs vs. the cost of inputs

How to set a price based on value (vs. an estimate based on cost)

The key factors to consider when setting a value-based price
The difference between short- and long-term value
The role of risk in an outcome-based agreement

Developing outcome-based compensation agreements

The right kind of client for an outcome-based agreement
The concept of the value scorecard
Transparency of data and information vs. transparency of costs and profits

The role of intellectual property in agency compensation

Why good and bad ideas shouldn’t have the same value
Charging differently for the creation of the idea and the value of the idea
Why and how IP ownership affects pricing in value-based agreements

To review some of Ignition’s work in this area, please visit the Publications section to view a selection of articles by and about Ignition associates in leading business and trade publications including Advertising Age, Admap, The Advertiser, Communication Arts, The Economist, Bloomberg News, the Wall Street Journal, and The Guardian.

To learn more about how Ignition can help your firm make the transition from cost to value, please contact Tim Williams at .(JavaScript must be enabled to view this email address) or 801.582.7297.

“Tim Williams brings smart and creative thinking to the challenges of organizing a dynamic agency during these fast-changing times. His wisdom has made us stronger. And his thoughtful personal style makes working with him thoroughly enjoyable.”

David Rawle, Chairman, RawleMurdy

“Tim Williams has an exceptional ability to uncover an agency’s strengths and turn them into business opportunities.”

Alan Bonine, General Manager, VitroRobertson

“Our work with Ignition has been different from other consultancies. Most of the work we have done together has stuck, has become part of our culture, and is being practiced regularly. There are a couple of reasons why that’s true. First, what you say makes an enormous amount of sense. Second, the way you say it has immense credibility. Your trust factor with our staff was almost immediate.”

Joe Norris, President, Sullivan Higdon & Sink