The cost of living crisis isn’t just impacting those struggling to get by. It’s a situation being exacerbated by rising inflation and inflation affects everyone, particularly at a time of great global instability.
With costs stacking up across the board, it’s only natural that agencies start asking themselves whether or not they should be jumping on the bandwagon and raising their prices alongside almost every other industry. But raising prices is never going to be a popular move with clients, regardless of the circumstances.
So, is it the right time to consider raising your prices? And, if so, how do you go about doing so without scaring off clients left, right and centre?
Facing the inevitable
Costs are rising for businesses on all fronts. Everything from petrol to personnel costs are going up sharply and the natural inclination when costs rise is to raise your prices in parallel. However, according to the IPA (the Institute of Practitioners in Advertising, nothing to do with heavily hopped beer), it might not be a welcome move for many agencies but it is an inevitable one.
IPA Director General Paul Bainsfair, says: “No agency would decide to raise their fees lightly. But with inflation levels at their highest level in 40 years – rising by 9% in the 12 months to April 2022 and potentially hitting 10% in the last three months of this year, such decisions are, unfortunately, inevitable.”
The fact is that agencies have navigated the fallout from Brexit and the pandemic as best they can. But they now face a myriad of increasing problems and costs that they can no longer be expected to realistically absorb.
Agencies are encountering a sector-wide skills shortage coupled with increases in recruitment fees; wage pressures with increased competition for talented people; individuals seeking higher salaries to offset the cost of living; raw material increases; as well as soaring energy and production bills.
So, while it might be feasible for some larger agencies to weather the storm and maintain their old fees (for now), for more boutique agencies going after the bigger game, rising prices are an inevitability. This is something that clients - facing enormous pressures themselves and in the main having to ensure that selling prices are moving in response – may not welcome but will certainly understand. At least if you pitch it right.
Value vs Cost
Selling the same service for an inflated price is never going to be easy. But you’re marketers, right? Honestly, the best way to ensure you retain clients and bring in new ones is by offering value and by being completely transparent. Keep the value you offer your clients at the front of their minds but don’t hide the fact you’re charging them more either.
If your relationships are strong then it doesn’t need to be an awkward conversation. We’re all in the same boat right now, after all. In a best-case scenario, both sides will embrace the situation together. That being said, the last thing brands want to do is pass on these extra expenses to their consumers.
The solution is in creating value by trimming the fat where possible and being brutally honest with what you can and can’t afford to scale back. Turn any rate increase into a win-win by reducing excess and eliminating ‘re-work’. Also, don’t be afraid to be flexible. There’s no “one-size-fits-all” approach and there are going to be different solutions for each client.
We’re facing a landscape now where everybody expects more for less but wants to charge more for less themselves. This results in downward pricing pressures that are, frankly, untenable. The answer, in a nutshell, is for agencies to position themselves as more than just creative machines.
An agency can be an effective commercial powerhouse with an expert understanding of consumers, including when and where is best to engage with them. It can be a more creative business consultant and a trusted partner. Most crucially, it can provide demonstrable evidence of the power and return on investment of its marketing communications activity in driving long-term brand growth for clients.
It’s all about value and right now, value is something we all… well… value, above almost anything else.
