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Point PricingTM
!An Inside Look at PR 20/20’s Value-Based Pricing Model!!
Paul Roetzer (@paulroetzer)!
Founder & CEO, PR 20/20!Creator, Marketing Agency Insider!Author, The Marketing Performance Blueprint (2014) & The Marketing Agency Blueprint (2012)!
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@paulroetzer
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I spent the first six years of my marketing agency career chasing hourly quotas instead of results.
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“Strive for 5”
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Yes, we cared if the client was happy and successful, but the fundamental economic driving force behind the firm's existence, and my career potential, was the billable hour.
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I discovered early on that the billable-hour model was a flawed, archaic, agency-centric system that wrongly tied agency performance to outputs, not outcomes.
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In 2004, four years into my career, I became highly motivated
to build a more efficient and profitable solution that shifted the focus
to client needs and goals.
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The idea was centered on making services tangible, with clearly defined costs, features and benefits,
almost like buying a product off a retail shelf or signing up for a software service.
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My theory was that if clients understood exactly what they were getting,
and agreed ahead of time what it was worth, we could remove the mystery from the equation
and focus on delivering value and results.
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The problem was that the billable-hour model was the only one I had ever known.
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How would I build an entirely new financial model and productize a service business?
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“The guiding principle was that set prices had to be
value based, meaning they were to be determined
based on perceived and actual value rather than the
number of billable hours something takes to complete.”
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value-based pricing!
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estimated hours (at peak efficiency) perceived value builder vs. driver hourly revenue target costs loss leader service level
value-based pricing variables
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the price of inefficiency a press release!
Professional A
Hourly rate = $150 Hours to complete = 3
Cost = $450
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the price of inefficiency a press release!
Professional B
Original draft ($150/hr) = 5 hrs or $750 Sr Assoc edit/review ($250/hr) = 1.25 hrs or $312.50
Edits ($150/hr) = 0.50 hrs or $75 Sr Assoc final edit ($250/hr) = 0.50 or $125
Total = 7.25 hrs or $1,262.50
Professional A = 3 hrs @ $450 Professional B = 7.25 hrs @ $1,262.50
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@paulroetzer
The agency, not the client, should pay for professional development and inefficiencies.
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inefficiency factors
distractions
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inefficiency factors
time tracking
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inefficiency factors
motivation
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builders are recurring campaigns designed to create and expand assets
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image: Pedro Moura Pinheiro
drivers are campaigns designed to capitalize on existing assets to accelerate success
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origins of the point pricingtm model!
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2006!
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2008!
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2010!
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Started working on a marketing intelligence engine in early 2012.
Marketing Score became the minimum viable product (mvp)
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Looked to agile development models for inspiration on building software
and standardizing recommendations using artificial intelligence.
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“Lean thinking defines value as providing benefit to the customer; anything else is just waste.”
“As in any lean transformation, existing systems and tools often need to be reinvented.”
seeking inspiration
@paulroetzer
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In practice, many teams use a relative size measure such as story points or ideal days. In Scrum, it’s not about how much work you start; it’s about what customer-valuable work you finish. What we are trying to avoid is work that adds no short-term or long-term economic value.
seeking inspiration
Epics, Stories and Sprints
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Epics, Stories and Sprints were too abstract, so we simplified the concepts for marketers. Epics = Projects Stories = Tasks Sprints = Campaigns
seeking inspiration
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the value metric
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source: Price Intelligently
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a value metric is a pricing unit that aligns with the value you create for customers.!
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eggs = eggs!
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2010!
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2014!
Copyright © 2015 PR 20/20. !Point PricingTM is a PR 20/20 trademark. All rights reserved.! @paulroetzer
@paulroetzer
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Copyright © 2015 PR 20/20. !Point PricingTM is a PR 20/20 trademark. All rights reserved.!
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inside the point pricingtm model!
Point PricingTM is a PR 20/20 trademark. All rights reserved.!
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(it’s our value metric) !a point is a fixed unit of value.!
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Point PricingTM ensures clients get the full value of every dollar spent, regardless of how much time it takes to deliver.
point pricing basics
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Each project within a campaign is assigned a fixed-point total (e.g. blog post = 3 points) based on value creation rather than hourly estimates. Points are allocated by campaigns and goal type (i.e. brand, leads, sales, loyalty), and therefore always tied to performance. Points provide total transparency into pricing, progress, performance and resource allocation.
point pricing basics
Every point has a purpose.
@paulroetzer
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builders!60%!
drivers!40%!
sample monthly gameplan
Campaigns Points Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Foundation 162 71 57 34 0 0 0 0 0 0 0 0 0
Lead Gen Strategy (Audience #1) 21 21
Brand Analysis 21 21
Marketing Budget Analysis 8 8
HubSpot Demo & Strategy 5 5
Contact Database Analysis 3 3
Blog Editorial Calendar 13 13
Lead Conversion Strategy 21 21
HubSpot Integration & Onboarding 13 13
Website Conversion Optimization Strategy 5 5
Agency Matrix Management Strategy 5 5
Google Analytics Dashboard Setup 8 8
Social Strategy Review 5 5
Brand Awareness Strategy 34 34
Lead Gen (Audience #1) 375 0 50 25 15 60 25 15 60 25 15 60 25Lead Gen Campaign #1 100 50 25 15 10
Lead Gen Campaign #2 100 50 25 15 10
Lead Gen Campaign #3 100 50 25 15 10
Lead Gen Campaign #4 75 50 25
Lead Conversion 300 0 0 50 25 15 60 25 15 60 25 15 10Lead Conversion Campaign #1 100 50 25 15 10
Lead Conversion Campaign #2 100 50 25 15 10
Lead Conversion Campaign #3 100 50 25 15 10
Brand Building 327 16 16 16 31 31 31 31 31 31 16 16 16Blog Posts (4 per month) 192 16 16 16 16 16 16 16 16 16 16 16 16
Brand Building Campaign #1 45 15 15 15
Brand Building Campaign #2 45 15 15 15
Brand Building Campaign #3 45 15 15 15
Management 120 10 10 10 10 10 10 10 10 10 10 10 10Monthly Campaign Scorecard Report 60 5 5 5 5 5 5 5 5 5 5 5 5
Monthly GamePlan Review Session 24 2 2 2 2 2 2 2 2 2 2 2 2
Weekly Activity Reports 36 3 3 3 3 3 3 3 3 3 3 3 3
Client Calls and Emails (Included) — — — — — — — — — — — — —
12-Month TOTAL Estimated Points 1,284 97 133 135 81 116 126 81 116 126 66 101 61
MONTHLY Budget @ $140/point $14,980
sample 12-‐month program
Chart shows Point values for hypothetical 12-month program!
@paulroetzer
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sample content campaign
Project Points
Ebook with Design 55
Landing Page 2
Email Nurturing (x4) 8
Case study 8
Blog Post (x3) 12
Social Shares 2
Social Ads 13
TOTAL 100
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every campaign is a series of projects designed to achieve a goal
sample campaign center
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sample campaign center
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sample campaign center
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sample point pricing value chart
Standard Point Pricing project value charts are built into online client centers
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assigning point values
Agencies can’t accurately predict hours due to variables such as professional competency, focus, efficiency and forecaster bias. The higher the number, the more uncertain the forecast. The Fibonacci sequence reflects this uncertainty.
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assigning point values
The sequence represents a set of numbers that increases roughly based on a fixed ratio of 1.618—the golden ratio. Each subsequent number is the sum of the previous two—1, 2, 3, 5, 8, 13, 21, 34, 55 . . .
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We’re still very early in the process, with significant iterations in the works . . .
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But we can already see positive impact on productivity, accountability, client performance, agency growth and profits.
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considering a pricing model transformation?!
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pricing model considerations
What are the weaknesses of your current model?
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pricing model considerations
What are the agency (and client) goals for the new model?
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pricing model considerations
What services does your agency provide that can be standardized (i.e. description, scope, price)?
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pricing model considerations
What is your agency’s value metric?
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pricing model considerations
What is the price per X (X = your value metric)?
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pricing model considerations
Does the price per X vary based on service package level?
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pricing model considerations
Should you publish your pricing?
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pricing model considerations
Will the model work within your existing project management, time tracking and accounting software?
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pricing model considerations
Are there options to beta test the model?
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pricing model considerations
How and when do you introduce the new pricing model to clients?
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pricing model considerations
How do you ensure loyal clients receive equal or greater value in the new model?
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pricing model considerations
How do you benchmark and monitor impact on performance—clients, agency and personnel?
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“The future belongs to dynamic agencies with more efficient
management systems, integrated services, versatile talent,
value-based pricing models, a love for data, and a
commitment to producing measurable results.”
paul roetzer, @paulroetzer CEO | PR 20/20 creator | Marke<ng Score & Marke<ng Agency Insider author | The Marke)ng Performance Blueprint (Wiley, 2014) & The Marke)ng Agency Blueprint (Wiley, 2012)
www.pr2020.com
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Remington Begg!CEO & Founder!Impulse Creative!
Panel Discussion: Room 108!
Carman Pirie!Principal!
Kula Partners!
11:45 AM – 12:30 PM !
