If it takes you 3 hours to come up with a great idea, whatever your business, is your idea only worth those three hours of your time?
If you charge by an hourly rate, isn’t a good idea then worth the same as a bad idea that also took 3 hours to come up with?
How do you begin to assess value to an idea when you only charge according to the amount of time it takes to arrive at it?
This is one of the many issues debated yesterday as 7 independent agencies from Western Canada, all members of T-CAAN, gathered in Victoria at the Inn at Laurel Point to listen to Tim Williams’ view of the advertising industry.
Readers of this blog will know something about Tim. Author of Take a stand for your brand and the just-released Positioning for professionals, Tim is a catalytic individual. He gets you thinking.
The issue of how advertising agencies are paid for their ideas is one area where he pushed us pretty hard.
He reasons, correctly, that the hourly rate represents the cost to the agency, not the value to the client. Whatever your business, the same principle applies.
He also deduces, correctly again, that agencies commoditize their ideas by charging an hourly rate.
And here’s something really insightful and depressing: agencies are among the few creative service providers in the world who choose not to own the rights to their ideas. Unlike, say, photographers, we don’t normally license them to our clients: we give them away for the hourly cost of loading the files onto the client’s FTP site.
The solution? Find out what a client’s critical success factors are and negotiate compensation models that work with those.
Costing vs. pricing.
Costing, Tim says, is a science. Pricing is an art.
Art eh? Creative businesses should find something to like in that.
(Agencies that participated with Copeland were Aasman from Whitehorse, Kellett from Yellowknife, Ragan Creative from Kamloops, Elevator from Vancouver, Zero Gravity from Calgary and Brown Communications from Regina.)