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The Myth of Hourly Rates

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Hourly Rated blog

Hourly rates for the various services an agency provides have long been a sticking point for me. Hourly rates can create such a shell game; I just don’t understand why otherwise savvy clients want to get so granular with billing.

Those conversations usually go something like this:

Client: What’s your hourly rate for copywriting?

Me: Are you buying hours or are you buying solutions to a marketing problem?

Client: Don’t change the subject. I want to know what I’m getting for my money.

Me: I understand, but that’s what I’m trying to tell you. You don’t want to pay for time; you want to pay for the idea, for the solution.

Client: But how do I know I’m not paying too much?

Me: How do you know you’re not paying too little?

Client: Who’s on first?

Me: Fair enough. Let’s try this: If I tell you the tactical solution to your $100,000 strategic problem will cost you, let’s say, $10,000. Will that seem fair?

Client: A 10:1 return on my marketing investment? Sure, that’s fair.

Me: So, it doesn’t really matter to you if our hourly rate is $80 and it takes us twelve-and-a-half hours; or if our hourly rate is $150 and it only takes us six-and-a-half hours? Your problem is still solved, right.

Client: Ok, I think I see what you’re saying now.

Unfortunately, not all of those conversations go like this. But it is true. Why would any businessperson put their top talent on a project, only to handcuff them with a discounted fee structure? If an agency is giving you discounted rates, make sure they’re not giving you discounted talent.

At Current360, we often spend so much of our days solving our clients’ marketing problems that we seldom have time to devote to our own. Back in January, we pulled some of our top minds out of the office for a day to work on our business. One of the 16 initiatives to come out of that retreat was to build into our client relations the idea of value pricing: Charging for solutions instead of hours.

Through our various memberships, we have access to national, regional and local agencies’ fees for various marketing solutions. Using this data, along with a sensible “what’s this worth to our client?” mentality, we are developing some value-based pricing solutions.

If you’ve known us long, you know the C360 Way of doing things is to give our clients a budget and stick to that budget. We also utilize not-to-exceed pricing. Our estimates are based on the time involved in a project.

The beauty of this approach is that it frees our people to solve the problem, not spend a specific amount of time on it. Certainly time spent is going to be important to the profitability of our company, but we believe in long-term relationships. And if the project takes more time, that’s our investment in the client relationship.

If you’re a client, what would you rather buy from us: 10 hours at $200/hour, 20 hours at $150 or a great idea that solves your problem?

That’s what we think, too.

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