F10-03·F10 — Marketing Organisation
The Agency Business Model Problem
The productive tension
Hours-based billingandvalue-based pricing
The synthesis
Neither pure hours nor pure value-based pricing works for most agency-client relationships. The best fee structures are explicit hybrids — retainers for capability access, project fees for specific deliverables, performance bonuses for measurable outcomes. The evidence-based marketer matches the fee model to the nature of the work and refuses to let procurement default everything to hours.
Learning objectives
- →Explain the history of agency pricing from commission through hours to value-based
- →Identify the perverse incentives of pure hours-based billing
- →Evaluate the conditions under which value-based pricing works
- →Design hybrid fee structures appropriate to different types of agency work
- →Recognise the pitch economy problem and its hidden costs
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