This week on the Agency Leadership Podcast, Chip and Gini discuss the drawbacks to pricing wars, and how you can extract fair value for your services as an agency. They go into the dangers of undervaluing what you provide solely to get new customers in the door, because not only will it hurt your bottom line, but it can have a negative impact on the industry as a whole.
They explain how pricing under costs sets a precedent you cannot meet in the future, and this will in turn give your clients the wrong expectation of how much it will take for you to complete a certain project. Other topics on the table include agencies who intentionally wish to undercut others and what percentage profit should you be taking.
Resources
* PR agencies: don’t start a price war on fees (PR Week)
Transcript
The following is a computer-generated transcript. Please listen to the audio to confirm accuracy.
CHIP: Hello, and welcome to another episode of the Agency Leadership Podcast. I’m Chip Griffin,
GINI: and I’m Gini Dietrich,
CHIP: and we’re here today to talk about war. Price wars To be more exact. I don’t know, Jenny, I mean, it’s, I think we’re all feeling a little rundown right now, as we record this head of Independence Day holiday here in the United States, we are out of gas. I’m gonna fake it as much as I can.
GINI: I think everybody as I said this in the Spin Sucks community, but it really I mean, I don’t know if everybody has, but it feels like everybody took this week off because everyone’s just like, I’m done. I’m out. Taking a week off. I don’t care if I have to just sit in front of my TV, but I’m out.
CHIP: You know, it’s it’s not about me, you know, we all sort of, I think overestimate the additional time that we’ve supposedly gained by being at home and obviously, I know you were having a young child at home Have not really gained anything she actually lost. I’ve just lost the difference.
GINI: Yeah. But what I think that happened before March however, so.
CHIP: Well, okay. Yeah. So. So today we’re talking about an article that appeared in PR week and it was by Steve Strickland. And unfortunately, I do not know the name of his agency. Oh, Tucker Taylor troublemaking force. Yeah, it was that cool agency name? Yeah, it’s one of the ones that is
GINI: nice. Yeah, nice alliteration. Exactly.
CHIP: any case, so he talked about why PR agencies should not start a price war on fees right now. And obviously, this is this is a concern because as anytime that there is an economic storm, people will do whatever they can to get business whatever they can to grab market share. And so you know, what were what were your thoughts? After reading the piece, Jenny,
GINI: you know, I mean, I liked the piece I thought it was, it was interesting. I appreciated that he talked about two things. One, one that large agencies typically have savings and so they can undercut their own fees and still make their payroll in order to bring on new clients. And I also appreciate that he said, You know, when we do that, even if we can afford it, not only do we hurt ourselves in the long run, but we heard our small agency partners because they can’t do that. And so we’re undercutting the entire industry by cutting our fees, which I agree with.
CHIP: Well, that that is absolutely true. And I am of the belief that I don’t care if you are a one person solo agency, a small agency mid size large agency, you should not ever be pricing below your actual cost. You shouldn’t be using savings to subs No, no, no, you absolutely need to be pricing appropriately because it will back to bite y...