[VIDEO] How to Create Pricing Power for Your Digital Agency

Written By Danielle Fauteaux

Recently Upsourced‘s ‘Creative Outcomes‘ podcast team invited me on to discuss how your agency’s positioning impacts your pricing power.

I also dispelled some myths about why clients buy your marketing services and how it is different than what you may think.

Plus, we dig into:

  • Ideas for Increasing Pricing Power Through Adjustments to Your Agency Positioning
  • How to Overcome Marketing Commoditization and Be Positioned as a Strategic Advisor
  • Teaching Your Account Managers to Think and Act Like Advisors

You can listen to the full episode below:


[00:00:00.520] – Meredith

Alright, we’ll go ahead and get started. Welcome to the show, Danielle. I’m super excited to have you here today. Let’s jump right into things. Can you tell us a little bit about your background, a little bit about your agency journey, where you started, where you’re coming from, where you’re going?

[00:00:16.270] – Danielle

Thanks for having me on. I would love to dive into a little bit of my background. I started in the world of agencies at a web dev shop, individual contributor role. I’ve worked at several different agencies. I moved to an agency where I was a strategist doing client facing work as well as content strategy and inbound marketing. Then I moved into some director of marketing positions and types of roles at different agencies. The reason for that progression was I noticed that the owners I was working for would always be focused on solving for bizdev problems and making sure their positioning was right and that they actually had a full sales pipeline. And some agencies that I worked at did it better than others. And for the ones that didn’t have a solid marketing system down for their agency, they really struggled. And I wanted to help them get their lives back and regain the passion that they originally had for their agencies, not feel so burnt out, not feel so overwhelmed. And so I’ve come alongside agencies now to help them build their own marketing systems for their firms so that they’re not another situation of the cobbler whose kids have no shoes.

[00:01:32.620] – Meredith

Cool. So let’s talk about what’s the commonly held value within the world of development and marketing and what you strongly disagree with.

[00:01:45.550] – Danielle

Yeah. A lot of marketing agencies and developers, they think that their quality is what differentiates them. And the unfortunate reality is that that is simply not true. People buy low quality Dev and marketing options all the time because it’s positioned better and it resonates with the audience. It resonates with the buyer. And because of that message, because of that positioning, because of the solution that the buyer is seeing that the marketing agency is touting, they make that purchase, even if they could find quality that is higher elsewhere. And so a lot of firms really struggle getting past that mindset of, Well, my quality speaks for itself. Nowadays, it really doesn’t. It does in some situations, so don’t take me out of context all the time there. But by and large, quality is not going to cut it for a positioning strategy.

[00:02:43.670] – Meredith

So how do you get what do you recommend? How do you encourage pricing and positioning? Is that separate? You look at that together. What are your thoughts there?

[00:02:52.320] – Danielle

They’re really closely tied. When you’re positioned properly, especially when you’re positioned as not just a subject matter expert, but an industry expert, you’re able to price like an advisor, like a consultant, as opposed to pricing like implementers. As we all know, marketing becomes more and more commoditized year after year. Even the specialty trades of marketing, like graphic design, they’ve already been commoditized. They’ve been commoditized for years. Web design has been commoditized and content has been commoditized. And this is going to continue to happen. What cannot be commoditized as easily is the strategic thinking, the critical thinking, the industry knowledge, and the experience to guide clients through different circumstances. And so agencies that are able to position themselves among an audience that is very focused niche down into an industry vertical is what I recommend. They are able to provide solutions that are most relevant. They’re able to speak the language of their audience base, of their clients, and they’re able to get ahead of different market forces that are changing the dynamics of their client base too. And because of those aspects of their positioning, they’re able to charge more too, and the client see them as more valuable.

[00:04:18.780] – Danielle

So initial customer value is higher and customer lifetime value is higher when you’re positioned that way. So positioning and pricing very closely linked.

[00:04:28.840] – Meredith

Yeah, I totally agree. So how do you think about it? What are your recommendations to try to niche down and to try to find those verticals? Because some of our clients do that, some of them not so well. So how should we think about that?

[00:04:41.970] – Danielle

First, I want to start by saying, if you are a generalist agency right now, it can be hard to find a focus to niche down. I just want to acknowledge that it is hard and you just have to push past that struggle and be willing to focus. Now, a lot of times there’s some push back here because you might feel like you’re putting yourself in a box. You’re limiting yourself, maybe, and that you’ll have to lose out on opportunities. And that is a mindset that a lot of people do have. I like to open your eyes a little bit more and show you how the box actually gets a little bit bigger because you are able to offer something that no one else can as opposed to being the same as a gazillion other agencies out there. So you actually become a better offer and so you open up new opportunities for yourself. You know who to connect with on LinkedIn and start conversations with. You know who to establish marketing partnerships with and do networking with. You know what events to go to. You know what associations to join. You know where to go find your audience, basically.

[00:05:50.720] – Danielle

So you can also be doing inbound marketing and lead generation through digital means, but you can also be actually going to your audience, which a lot of that art and practice, I think, has been lost over the last decade or so. And agencies that get back into that do so much better. So niching down really helps there. And the other thing that I would say is it’s okay if you start with maybe three, if you’re a generalist and you start with three to focus down, and then you really get specific on helping those audiences, and then you narrow it down to one again. That will help give you some clarity. Now, how do you go about picking even just those three? Well, you can look at a couple of different things. One, what do you know? Who are your best clients? Where do you find you lend the most advice in an actual industry space as opposed to just doing a lot of work? The other thing, too, is your team needs to be passionate about the industry too. So make this a collaborative conversation with your team, especially the key players, your A team, the people that have been with you a long time, the people that are the face of your agency as well.

[00:06:58.100] – Danielle

Look also at the market. Is that industry growing? Is it shrinking? What is it looking like? Is that an industry that you would just on a random evening be interested in reading news about? That’s a good indicator that might be a good thing to pursue. So maybe you’re an agency and you’re really into beer and wine and brewing and distilling processes, and that just really lights up your world in the evenings. Can you position yourself to market to breweries and distilleries? Yes, you can. Maybe you’re really passionate about… It could even be something just very practical, of course, like construction. You might have come from a construction background, so you find yourself being able to position yourself to those trades people a lot better. So look at those options. I do have a niche picking workbook on my website that is available that guides you through the process and some things that you can write down, some questions to answer, some market analysis that you can do with your team too. So people can download that for free on my website if they want.

[00:08:01.930] – Meredith

I love that. It’s finding where your passion and where your excellence lies and that’s in your purpose all come together. Love it.

[00:08:10.550] – Danielle

Leaning into your strength but also recognizing, maybe you love… Gosh, I can’t even think of anything random.

[00:08:20.550] – Meredith

Dogs, animal shelters. Go find your passion. Yeah, I know. I love it. Awesome. Okay. What do you hear all the time from agencies about why they price their services the way that they do?

[00:08:36.160] – Danielle

Usually, agencies are pricing as a cost of materials type of pricing model. So, they will look at, okay, what are my hourly costs for the employees doing this and the cost of materials to do this? Any softwares that we’re paying for to deliver on this work? Any physical print costs for media? And then they add a percentage on top of that. And a lot of times in that model, they’re not accounting for extra overhead that happens in managing the client relationship. There’s a lot of time that goes into that. But that’s usually what they do. Another way that people will go about it, which is similar, is they’ll look at what some of their competitors are charging and they’ll charge that. They might not know what their project run times are. They might not have that information to be able to calculate the full cost and materials of it. I see a good case to be made for doing a modified version of value based pricing where you have a price floor that is cost based, so you would never go under that price because it’s simply not profitable for you. But looking at the value that you’re adding to your client’s business is really important.

[00:09:50.130] – Danielle

And that ties back to your positioning as you’re positioning as an advisor, are you helping them scale and grow? Are you just doing the work? And your pricing.

[00:10:00.000] – Danielle

And the way you present that to clients actually is a really clear signal to them of what agency you’re going to be as well.

[00:10:08.230] – Meredith

Yeah, I love that. I see a lot of my clients use… I think the floor is a really good number to know because a lot of our clients, they want to do really cool projects as a piece for their website, right? And invest a lot. That’s great and we need to have that, but you have to have that balance of like, we’re making money over here and then we can break even over here. So as long as you know that floor, it’s like, okay, we’re going to do this cool project, this passion project, but it has to be at this level and no lower. We’re going to lose more money on it.

[00:10:39.690] – Danielle

And case studies are a compelling reason for some projects. However, you also want to make sure that that level, that caliber of work is something that other clients would buy, other prospects would buy. Because if you deliver a $100,000 website, but your target audience can only afford $15,000 websites, but they see your work on a $100,000 website, that’s what they’re going to expect, and that’s not what you’re going to be able to deliver. So you have to balance that, too.

[00:11:09.200] – Meredith

That’s a great point. Yeah. Okay. Technically, what can the agency owners, client managers do to increase pricing power? And how do you build pricing power?

[00:11:22.880] – Danielle

You build pricing power through your stances as an advisor, really. That’s how you go about it. And your client account managers do this, too. And you have to train them to do this as well in how they speak with clients and how they proactively go about providing solutions instead of just reacting to client requests. So there’s some training and policies and procedures that need to be built into your operation structure for this too. But it starts in the sales process. It gets carried in through operations, and then you repeat the cycle. If you’ve got retainer clients, you’re continuing to delight to add value to their business. Another thing that you can do is identify what tactics are going to be working best for clients. So this is a tactic for tactics, where if you are working with a specific group of business owner types or businesses, then you can see, well, within the world of marketing, this works best. Within the world of sales enablement, this works best for these kinds of businesses. Because there are so many tactics out there that work well for certain industries and don’t work at all for others. So you can identify that and you can actually create your service mix around your clientele now.

[00:12:37.560] – Danielle

And so you’re positioning a solution that is even better. And this works for Dev Shops too. It’s not just for marketing agencies. If you know what the typical platforms are that they need to integrate with, you market that. You put that on your website, you call it out that you’re experts in those and tying solutions together. You show some case studies of how you’ve done that before so that they can actually see what they can expect and if you are going to be able to solve their problem.

[00:13:05.060] – Meredith

Yeah. Okay, makes sense. How have you seen agencies better frame their value and marketing messaging during sales conversations?

[00:13:15.950] – Danielle

Yeah. A lot of that goes to how they’re positioning their solution. Are they positioning it as implementation? We’ll do all these things. It’s going to cost this, and we’ll see what happens. That’s very much implementation. Whereas the opposite is, we are going to come in and help your business scale 2x, 4x, 10x, whatever it is that your marketing system that you’re selling can promise, that’s what you position on. And so then you look at, okay, well, for a small business that is currently making 4 million, if they were two X’d in a year or two years, they’d be making 8 million. So to them, how do they get a 10 to 1 ROI that’s very easy to price? And then you position it off the 10 to 1 ROI because you can then show them you are getting the value out of your money. Here are the case studies of how we’ve done that. Now, there’s actually been studies too, that you don’t want to promise much more than 10 X. People start to distrust what you’re offering once you reach that threshold, I think it’s between 10 and 12 times. If you get above that threshold, they actually lose trust in that.

[00:14:31.210] – Danielle

So be mindful of that too. But look at what you’re providing as value. And if you don’t know, that’s a yellow flag right there that you need to investigate and find out. So if you don’t know what the value is that you’re providing to clients, you need to pick up the phone, you need to get on calls with them and figure out what the value has been to their business. You need to know that information in order to continue selling your products and services.

[00:14:56.800] – Meredith

I think that’s where a lot of agencies probably fall, especially if you’re hustling. You’re in that 1 million to 3 million range. You’re hustling and trying to just bring in the work and service the work, and you might lose sight of that. So I think that’s a really important point.

[00:15:14.740] – Danielle

Well, it’s really common. And you can get ahead of that too by creating some feedback loops where clients are reporting back to you. Not every client will, but if you put the system in place, you’ll at least get some information back. And you can also train your client account managers to ask questions that lead to that information when they’re reviewing analytics with clients. So some of that goes back to the policies and procedures you’re putting in place that you’re training your employees on in order to get that information back to the operations managers and to your biz dev team.

[00:15:44.990] – Meredith

Yeah. Plus it still feels like if you have that connection with a client, even if they’re like phasing, calling on clients that you’ve had in the past, it could bring open new opportunities to do work with them again and just continuing to have that relationship.

[00:16:00.700] – Danielle

Absolutely. And even on the negative side of things, if your work for them did not yield a high enough return, that’s information that you need to know as well, because it means you need to change how you’re helping clients in order to make them more successful, and then you’ll be more successful from there too.

[00:16:18.770] – Meredith

Yeah. That’s not always the fun question to ask.

[00:16:22.100] – Danielle

Oh, it’s definitely not. Definitely not the fun question to ask, but it’s really important.

[00:16:27.180] – Meredith

Totally agree. Totally agree. Okay, so in your experience, are agencies owners afraid to change more or just simply unaware of the value that they’re adding to businesses? Is it a mixed bag? What do you think?

[00:16:42.120] – Danielle

I think a lot of agency owners feel stuck and in this weird analysis paralysis phase because there’s so much noise. And so, there’s this hope that people will just find us as the agency and they’ll see our value. We know we’re valuable. Again, going back to that, we know we have quality. Unfortunately, there’s so much noise, so many agencies out there now because of the Internet. Everything is very horizontal now. So, you have to differentiate differently than just being an agency in a city that is locally available to small businesses or midsize businesses or large enterprise companies. You have to go much further than that now. And that is super scary. It’s really scary to take a stance on something. I think that’s what trips up a lot of agency owners. But once you do take a stance on something, it becomes a lot easier. Once you have a soapbox to stand on, you know what you’re talking points are going to be and you know who you’re speaking to. So again, the language that you’re using changes and it becomes easier to identify good fits, bad fits, and how to approach your sales conversations.

[00:17:56.970] – Meredith

Yeah. Okay. Do you have thoughts on what the good, better, best type of pricing model is?

[00:18:05.020] – Danielle

Yeah. I think it depends on what you’re delivering. So depending on the types of services that you offer, good, better, best can be a great option. You can, based off of your target audience, you can be serving smaller businesses while you’re serving midsize businesses and doing different scopes of work within each. What you really want to make sure that you’re going back to is what is the good, better, best? Is the good, better, best based off of client results that can be expected, or is it based off of your time and materials? I would say make sure that it’s based off of what the clients can expect their results to look like as opposed to what your time and materials is. Another great option to look at, especially for project based firms that do a lot of ad hoc work and one off projects and might run into lots of pressures for time where clients want something turned around very quickly is doing rush fees and rush based pricing. So you can have your standard rate and then you can do a quick turnaround rate that’s like 20 % more. And then you could do an ultra-fast turnaround rate, which is like 50 % more.

[00:19:16.980] – Danielle

You’re delivering the exact same work. It’s just delivered in a different amount of time. So that’s another option. And that can really help with managing some of the challenges of clients that are coming and need something super quickly. And you have to have the stuff available and maybe you have to pay more to get stuff out the door. People are working long hours and they’re burnt out, so you need to pay them higher salaries. So there’s a lot of things that go into that particular piece.

[00:19:42.070] – Meredith

Yeah. So I see a lot of, instead of the rush piece side of project based work, I see a lot of, Oh, these projects are just continuing to drag out. And sometimes it’s the client’s fault, and then sometimes it’s the agency’s fault. And finding that balance of how can we stay on track of the plan? Because it burns your margins so quickly. How do you navigate that? How do you go back and ask for more money? What are best practices on that?

[00:20:14.680] – Danielle

What do you think? Yeah. Well, I would say get ahead of it from the get go. So you should have something written into your standard agreements, first of all, of what the timeline is going to look like and what the expectations are for the client. So if the project is going to run long because the client is not getting back to you within two days, a week, whatever the time frame is, you need to write that in so that you can go back to a documented piece that they have signed and agreed to that they will get back to you within a certain amount of time. So that’s a safeguard for you. Now, in terms of pricing and eroding margins based off of projects running long, that’s really more of an operations issue. So looking at where the bottlenecks are happening, where things are getting stuck, and solving for that is really important. And then the other piece to that is managing the account managers and how they are setting expectations with clients. We as account managers, creatives, as agency leaders, we want the best for our clients. We really do. And so we instill that into our team members, too.

[00:21:23.370] – Danielle

And so sometimes that can be interpreted as do anything and everything for them as much as possible. It doesn’t matter how much it costs. And in some agencies, account managers don’t really know how much a client is paying for something either. So I think going back and looking at, how have I set expectations with my account managers? Are they overdelivering here and overcommunicating because of expectations I’ve set that need to be reset internally and with clients? Or is it really a client issue? Then if you have a client that’s just really stringing a project along, there are cases where you simply have to end the project. And if they want to continue going, then it’s going to count as a new project. It’s going to get a new scope of work, a new timeline, and you can proceed from there. You can also write some of that into your initial agreement, depending on the work you’re doing and some standard timelines.

[00:22:14.860] – Meredith

Yeah, I see that a lot. I think those are really good pieces of advice. Okay, what is something that you and your team have recently launched or accomplished or something that you’re super proud of right now?

[00:22:30.730] – Danielle

Yeah, I am really excited about a guide that we’re putting together on. It’s the Gardener’s Guide to Growing Your Digital Agency. And it takes more of an allegorical approach to looking at the operations of your agency, the business of your agency. And the goal with it is to get you thinking about what things look like boots on the ground, because the environment that your agency is in is different. Not every agency is the same, and not all of your team members are the same. And there’s a lot of life lessons to be learned from what we see around us. And I’m a big gardener, and so it just translates really easily. I see a lot of it when I go garden. I’m like, I wish people could just understand these principles. It would make their lives so much easier. So that’s what we’re pulling together. I’m really excited about that. That’ll be up on the website soon, too.

[00:23:23.910] – Meredith

Awesome. I love that. Cool. Want to leave us with, what’s your favorite quote?

[00:23:31.110] – Danielle

Oh, what’s my favorite quote? I don’t know if it’s a full quote, but something that I say a lot is done is better than perfect. And this is really important for creatives that struggle with perfectionism and getting marketing materials out the door or reaching out to that person, it’s okay to not be perfect. Done is better than perfect. If you can get it to 80, 90 %, launch it and you can always go back and tweak it again. But if you get it to that point and launch it, you will get much more yield from launching it than if it just sat in the back corner of your brain for much more longer.

[00:24:07.640] – Meredith

I love that. Awesome. This has been great. Thank you so much. Can you leave the audience where to find you, how to contact you if they want to learn more about what you guys are doing?

[00:24:19.560] – Danielle

Sure. Well, thanks for having me. I’m most active on LinkedIn, so you can find me on LinkedIn. I’d love to connect with you there. And you can also find me at getting momentum. Com.

[00:24:30.460] – Meredith

Awesome. Thanks, Danielle.

Building a successful marketing agency takes grit, a focus on your value, and sometimes a *loving* kick in the pants.

Needing an ally as you achieve your long-term goals?

I’d be happy to help.

Danielle Fauteaux, Agency Coach

Danielle Fauteaux

Hi! I’m Danielle. I’m passionate about helping creatives recognize their value and place in this world, passionate about helping leaders regain control over their responsibilities, passionate about encouraging others to live more meaningful lives; and passionate about doing more with less. I guide creative firms through the Momentum Framework to achieve their revenue and profit goals while falling back in love with the mission they originally set out with.