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“Nobody wants to pay for strategy” and Other Myths

Kieron McCann

In recent months I’ve heard several agency leaders claim that "nobody wants to pay for strategy". The message from them is that while strategy is an essential function in delivering value to clients, no client recognises any value in it. It’s an overhead cost that’s a necessary evil to secure the downstream commodity production or activation revenues that flow from it.

If this is true, it’s quite worrying for several reasons:


  • An agency’s ability to formulating an innovative strategy or viewpoint is one of the key things that should provide differentiation

  • Good strategy people aren’t cheap or abundant and represent a significant cost to a business. It’s a problem if those costs can’t be recovered.

  • Strategy is typically a high value, conceptual, people driven function that is hard to substitute or automate away.


To me as a strategist however this doesn’t feel right. It doesn’t make logical or intuitive sense. If strategy is so critical to the outcome, then why is it not being valued?

 

It all starts with definitions

When a problem like this happens, like all good strategists should, I go straight to unpicking the problem to make sense of it. Invariably this always starts with being clear about definitions. What question are we really trying to answer and What do we really mean by the statement “Nobody wants to pay for strategy”?

 

What do we mean by ‘Nobody’?

Who are these nobodies? Is it really everyone, or are we talking about some specific group? Is it one client, or just all of them?

 

What do we mean by ‘wants to’?

Is this a desire thing? Are they given an option to not pay? Have they not been convinced of the value before the sale? Do they even perceive you as a seller of strategy? What expectations were set – has it come as a surprise, or do they know what they’re paying for? Did we live up to those expectations? Were they convinced but now they’ve seen the output they’re disputing payment?

 

What do we mean by ‘pay’?

Is it only an issue when it’s invoiced as a discrete line item? Or is it baked into the price of the downstream deliverables? Does the client think it’s unnecessary for a ‘strategy’ to be done for the work that’s been requested?   

 

What do we mean by ‘strategy’?

There are many kinds of strategy, each in different domains, such as business strategy, campaign strategy, content strategy, brand strategy. They’re not the same. Which one are we talking about? Was the customer clear on which one it was? Have we been clear about what we charge for each?


It would take some time to work through all these questions, which would make for a rather long article. Suffice to say, there is always work required to properly interrogate any statement or assumption that are made when a statement like this is made.  Once these have been fully explored we get to a set of one or more hypotheses which attempt to explain what’s really going on.

 

Hypothesis


The observed reality is that many agencies really are finding it difficult to get clients to buy or pay for strategy work. But my hypothesis is that this isn’t because there isn’t a need for strategy, nor that clients are unwilling to pay for it. It’s that in many cases the value for this work hasn’t been established. This could be because:


  • These agencies have not established the right expectations with the client about the necessity of completing the strategy work

  • They haven’t made it relevant to the work that is being requested

  • They haven’t set an expectation that this necessary work should be paid for

  • They haven’t established the value of that work, nor their own credibility to deliver it.

  • They have set the wrong precedent in the past for billing for strategy

 

We can boil this down to three core issues:


  • Expectation Setting

    Have you set the expectation from a client that where there is a necessary strategy element that it should be paid for?

    • Necessity - does the work you are doing for the client even merit a ‘strategy’ element?

    • Value - Have you established the value of the strategy in the work you are going to deliver to them?

 

  • Delivery

    Do they expect to you to deliver the promised value?

    • Credibility - Do they perceive you as a credible provider to undertake that work?

    • Quality – Are you able to deliver to their expectations and your promises?

 

  • Transparency

    Are you clear what you’re billing for? Do you bill for it explicitly or do you bake it into the price of other more tangible deliverables?

 

Expectation setting


Necessity

I think it’ll come as no surprise to anyone that some agencies are chancers when it comes to ‘strategy’. It often turns up as a line item in a proposal without much definition of what it really involves, its scope, or what would happen if it wasn’t there.


It’s important to establish with the client first that there’s even a need for strategy, and not to try shoehorn it in where it’s not needed.  So how do we know if it’s needed or not? Well, this depends on taking an honest assessment of where your agency sits in the hierarchy of services you are providing to your client. If the bulk of your work is fulfilling lower order tasks like producing copy, creating images or designs, the truth is, your chance of selling strategy is low. There’s absolutely nothing wrong with having a business that delivers on these tasks, but if your ambition is to charge for strategy, then you need to consider how take on responsibility for moving up the hierarchy.



The agency service hierarchy


If you’re at the lower end of the hierarchy, you need to be clear about what ‘strategy’ is needed. Not all strategy is the same. At the activity level there may be a small and very tightly defined strategy element – such as producing a media plan or a production plan that maximises the client’s bang for buck. At the campaign level, it’s the production of a campaign strategy to optimise things such as effectiveness and ROI. But let’s not pretend that we’re redesigning the brand strategy. Be specific about what you’re going to do, and why it’s necessary for a good outcome.

 

Value

Second, it’s important to establish that if strategy is necessary, that it has value. Lobbing a generic ‘strategy’ line item in there is not enough. Often there is a perception that the value of strategy really accrues to the agency and not to the client.


I would equate this to the ‘account management’ that turns up with every agency proposal. I will admit that when I was a marketing director, I always refused to pay for account management until the agency was clear about exactly what value I was getting from it. If it was for the luxury of having someone ready to take an order, it was always a no – “yeah, we’ll just phone it in”. But there are other parts of account management, such as project management which were of value, which I was willing to pay for if that was what the account manager was going to deliver.


“Why should I pay an agency to learn about my business? I just want to get to the output”

Strategy is no different – often it’s added as some obligatory line item with indistinct deliverables. A frustration expressed by many brand owners is “why should I pay an agency to learn about my business? I just want to get to the output”. To anyone in strategy this sounds like a ridiculous statement – how can you get to a credible output without spending time on understanding the situation and bringing your own perspective?


The issue here is that agencies focus their billing model on inputs (time spent by the strategist) and not the outputs – the fresh perspective and the inspirational, well thought out strategy that comes as a result. You need to establish what the client is going to get for their money and how this will influence the outcome. Sure, we can produce a set of activities, but if you don’t want our input on strategy, then you are going to have to own the strategy, and consequently any constraints that may have on the output. Which leads us to delivery.

 

Delivery


Credibility

Having established the necessity and value for a strategy, you’re not out of the woods yet. You also need to establish your credibility for delivering the thing that you’ve established is important. What makes you particularly well positioned to do this v’s the client doing it themselves? What skills, experience, methodologies or connections do you have that mean you are going to do a good job?

I want to be really blunt here, if your pitch is “We’ll put Julian on the job, he’s really good, wears edgy band t-shirts and glasses with thick black frames”, you may need to revise your story. You need to convince the client that your expertise is not only extensive, but repeatable. Case studies are good, but a methodology is better. Then, if you can leverage things such as tools or relationships that you have that make you faster, better value, or more effective, then use them. Having a clear and tangible set of deliverables that the client will get (as opposed to hours of inputs) will help with keeping yourself honest about the delivery.


Delivery

This one is pretty straight forward, but it’s surprising how often it can go wrong. You think you’ve done a great job on delivery, but the client seems nonplussed about the result. Of course, it goes without saying that you need to actually put in the work to deliver a good result, but often things go awry because there’s no clear definition of what that ‘result’ is. It’s important that you’re crystal clear about what you’re going to delivier, and what good looks like. This is where productisation becomes important. A repeatable methodology with clearly stated outcomes will make life much easier to refine exactly what you plan to deliver. It also makes your case studies more consistent and aligned to your methodology.


Transparency

Finally, when the work is done, it’s about being clear about the value you have delivered, and what you are charging for. I see agencies that have failed to do this attempting to stuff the not insubstantial costs of strategy development as an uplift across their lower order offers. In hierarchy terms, they aim to increase the price of the tasks to cover the strategy work they might have done at the campaign level. This has two negative consequences:

o   It makes your undifferentiated commodity tasks seem expensive, exposing you to agencies who are happy to deliver these items at a lower price with no expectations of strategy work

o   It undervalues the highly differentiated work you have delivered to the client. If you have put this work into establishing the value of your services, and set the expectation that it should be paid for, then charge for it clearly as a deliverable. Don’t give away the highly valuable element of your offer to win the low value stuff.

 

You can, and must, charge for strategy


Strategy is valuable and important. It can be the difference between stellar client outcomes and mediocrity. If we want to sell strategy, then we need to be realistic about what that ‘strategy’ is, that it's necessary, and how it delivers value to our client. We need to give them confidence that we are well positioned to deliver it in a much better way than the client could themselves. Once we’ve established value, we need to charge for it, not hide it as an overhead in the delivery of lower value services.  

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