More and more agencies are considering going to points based pricing. It makes a lot of sense. You don’t want to charge by the hour and you don’t want to be arguing with clients every time something takes longer than they think it should take to deliver.
However, points based pricing is not a magical answer to a more complicated challenge. Simply converting an hour of work into a single point is not going to fool anyone and it’s not going to help you get paid true value for the work you're doing.
Here are some considerations as you try to decide to use points or not to use points.
Points as A Measure of Value
If you’re considering moving to points, then I strongly recommend you do so as part of a value-based pricing initiative. Simply charging three points for a task that takes three hours is not going to do you any good. Most savvy clients will realize the connection and you’ll be in the same boat you’re in now.
Instead take the time it takes you to deliver the work and convert that to the value of the work you’re delivering. That whitepaper you’re researching, writing, designing, infusing with keywords, publishing, creating a landing page, a CTA button and lead nurturing emails is going to generate leads—it has value. Just because you deliver it in 10 hours doesn’t mean it should cost your clients 10 hours times your hourly rate of $150 or $1,500.
That whitepaper is an asset and has value to your client. So value-based points pricing allows you to better convey that concept to your clients. This whitepaper and all the work associated with it is worth 30 points. This means you need to value-engineer or reprice all your services when you move to points, turning a 15-point task into a 30-point task, as an example. This is going to help your agency be more profitable and it’s going to help you better justify and communicate value to your clients.
Points as Part Of Packaged Pricing
I see a lot of agencies who use points using them as part of packaged pricing. I don’t recommend you do this. Giving clients 100 points for four blog articles, one landing page, two CTA buttons, one monthly email and 12 social media posts is not what it means to do inbound marketing.
In essence, you’re commoditizing the entire effort. You’ve boiled down a ton of strategic marketing work into a simple package. Inbound is complex and creative work, it demands more than one of three packages on your website. Resist the urge to go this route.
Give inbound the respect it needs. Every client is different, every client needs a different set of tactics and a different implementation plan. Clients want to be treated personally and packaged pricing means every single client is one of three types. That’s not how inbound works and you’ll quickly find while this might be easy, it’s not effective at creating a sustainable and growing agency model.
Points and Agile
In all honestly, you probably shouldn’t even be considering points unless you’re planning on moving 100% to an Agile deployment model for all your clients. If this is the case then points is your best choice. That’s because points become the basic currency across your entire organization. Your clients have points, your teams are using those points to execute the engagement, everything they do costs points, all your people have a capacity for a certain amount of points each week, each of your teams has a capacity for points each week, you’re measuring the amount of points you ship each week, you’re tracking that velocity vs. their capacity and their commitment, it becomes all-encompassing and highly effective at judging the efficiency of your team.
But use points in this way, you need to be practicing Scrum. Your teams need to be executing the rituals of Scrum every single week. Your clients need to be aware of the points they have and how you’re planning on using them weekly and monthly. If clients run out, they need to buy more, or borrow from the next month. It takes month of practice and a commitment to changing the way you deliver services and the way you run your agency. Don’t head into this unless you're prepared to see it through to the end.
Points to Control Over Servicing
Over servicing is a habitual challenge for almost every single inbound agency. I work with over 50 agencies and it’s something that comes up in almost all our conversations. Clients want leads, you want to get them leads, so it’s all hands on deck to deliver—regardless of budget.
That’s fine for client services but when you get the monthly finance meeting and you didn’t make any money, this is usually one of the biggest reasons. Points give you a mechanism to control this as long as those points are used properly.
Clients need to be aware of their points. Clients needs to be included in the conversation around how you plan to spend their points. Clients need to know what actions they take that might cause you to use their points—like revisions or when they change their mind and ask you to redo work. You need to track points and communicate point usage to clients.
Once you start doing this and doing it well, you’ll be in a better position to say to a client, “yep, we can do that, but you’re out of points, so we either swap out something we agreed was going to help you get more leads and do this new tactic or you can buy more points for this month. Which would you like to do?”
The Points Conversation with Clients
When we first moved to points there were a lot of conversation around how the clients would react to the concept of points. To be 100% transparent, we spent too much time worrying about this. In the end, the clients were fine with it. They either didn’t care or they understood it perfectly. Many of the client are aware of how points work in Agile, many of our software clients already practiced Agile within their development teams, so using points for marketing didn’t even phase them.
The clients who didn’t care trusted us to get the work done, whatever system we wanted to use was fine with them, just keep delivering the results. I like those clients the best. Don’t let this concern you. Most clients are fine following your lead and as long as you have your story down, they’ll come along with you.
Estimating Points in the Sales Process
One of the more significant challenges with points is estimating how many points a client is going to need when you’ve only known them for a few hours. Most inbound agencies have similar sales processes and most include a few conversations and then prospects want to know how much they’re going to be spending on the program each month.
Estimating the number of points can be problematic. Especially if you underestimate them. Now you’re three months into the engagement, you can’t generate leads you have to go back to the client and ask for more points—not a good situation to be in.
What I suggest is that you give them a rough estimate, subject to change after your strategy work is completed. Now you have time to get to know them, their business, their industry and you have time to create their inbound program. We typically give clients a variety of options. One option that comes in close to the estimate during the sales process, one that is slightly more expensive and produces better results and then one that is much more expensive and produces dramatic results.
Now the client has three options and they see the impact their investment has on the results. There are always connections between investment and results. You should make sure those two aspects of your program are never uncoupled.
Moving to points based pricing is something to think about before you jump into it. There are a number of traps that without proper planning can get you into trouble with prospects, with clients and with your profitability targets. Instead of jumping in, consider testing it with a few selected clients. If you’re tests go well and you uncover all the trouble spots, then you can address those during the test and move forward with confidence.
Start Today Tip – Change for the sake of change isn’t a good policy. Only consider this if you’re having issues with hourly pricing, value-based pricing, over servicing, or you’re going to move to agile as your delivery model. If this is something you need to do, spend the time doing your research. Talk to agencies who are using pricing, find out from them what works and what doesn’t, then go forward with your plan to change all your pricing to points. This is going to take an adjustment to your sales process, any sales materials, your website and perhaps other assets too. Take that all into consideration as you decide how to move forward.
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