Paul Roetzer - Point Pricing

INBOUND15
Point PricingTM
An Inside Look at PR 20/20’s
Value-Based Pricing Model
Paul Roetzer (@paulroetzer)
Founder & CEO, PR 20/20
Creator, Marketing Agency Insider
Author, The Marketing Performance Blueprint (2014)
& The Marketing Agency Blueprint (2012)

#INBOUND15www.pr2020.com
@paulroetzer

@paulroetzer
I spent the first six years of my marketing agency
career chasing hourly quotas instead of results.

@paulroetzer
@paulroetzer
“Strive for 5”

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Yes, we cared if the client was happy and successful, but
the fundamental economic driving force behind the
firm's existence, and my career potential,
was the billable hour.

@paulroetzer
@paulroetzer
I discovered early on that the billable-hour model
was a flawed, archaic, agency-centric system
that wrongly tied agency performance to
outputs, not outcomes.

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In 2004, four years into my career,
I became highly motivated
to build a more efficient
and profitable solution
that shifted the focus
to client needs
and goals.

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The idea was centered on making services tangible,
with clearly defined costs, features and benefits,
almost like buying a product off a retail shelf
or signing up for a software service.

@paulroetzer
My theory was that if clients
understood exactly what they were getting,
and agreed ahead of time what it was worth,
we could remove the mystery from the equation
and focus on delivering value and results.

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The problem was that the billable-hour model
was the only one I had ever known.

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How would I build an entirely new financial model and
productize a service business?

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“The guiding principle was that set prices had to be
value based, meaning they were to be determined
based on perceived and actual value rather than the
number of billable hours something takes to complete.”

@paulroetzer
value-based pricing

@paulroetzer
estimated hours (at peak efficiency)
perceived value
builder vs. driver
hourly revenue target
costs
loss leader
service level
value-based pricing variables

@paulroetzer
the price of inefficiency
a press release
Professional A
Hourly rate = $150
Hours to complete = 3
Cost = $450

@paulroetzer
the price of inefficiency
a press release
Professional B
Original draft ($150/hr) = 5 hrs or $750
Sr Assoc edit/review ($250/hr) = 1.25 hrs or $312.50
Edits ($150/hr) = 0.50 hrs or $75
Sr Assoc final edit ($250/hr) = 0.50 or $125
Total = 7.25 hrs or $1,262.50
Professional A = 3 hrs @ $450
Professional B = 7.25 hrs @ $1,262.50

@paulroetzer
The agency, not the client, should pay for
professional development and inefficiencies.

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inefficiency factors
distractions

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time tracking

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motivation

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builders are recurring
campaigns designed to
create and expand assets
@paulroetzer

@paulroetzer
image: Pedro Moura Pinheiro
drivers are campaigns designed to
capitalize on existing assets to
accelerate success
@paulroetzer

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origins of the point pricingtm model

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2006
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2008
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2010
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Started working on a marketing intelligence engine in early 2012.
Marketing Score became the minimum viable product (mvp)

@paulroetzer
Looked to agile development models
for inspiration on building software
and standardizing recommendations
using artificial intelligence.
@paulroetzer

@paulroetzer
“Lean thinking defines value as providing benefit
to the customer; anything else is just waste.”
“As in any lean transformation, existing systems
and tools often need to be reinvented.”
seeking inspiration

@paulroetzer
In practice, many teams use a relative size measure such as
story points or ideal days.
In Scrum, it’s not about how much work you start; it’s about what
customer-valuable work you finish.
What we are trying to avoid is work that adds no short-term or
long-term economic value.
seeking inspiration
Epics, Stories and Sprints

@paulroetzer
Epics, Stories and Sprints were too abstract,
so we simplified the concepts for marketers.
Epics = Projects
Stories = Tasks
Sprints = Campaigns
seeking inspiration

@paulroetzer
the value metric

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source: Price Intelligently

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a value metric is a pricing unit that aligns
with the value you create for customers.

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eggs = eggs

@paulroetzer

@paulroetzer
2014
Copyright © 2015 PR 20/20.
Point PricingTM is a PR 20/20 trademark. All rights reserved.
@paulroetzer

@paulroetzer
Copyright © 2015 PR 20/20.
@paulroetzer

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inside the point pricingtm model

@paulroetzer
(it’s our value metric)
a point is a fixed unit of value.

@paulroetzer
Point PricingTM ensures clients get the full
value of every dollar spent, regardless of
how much time it takes to deliver.
point pricing basics

@paulroetzer
Each project within a campaign is assigned a fixed-
point total (e.g. blog post = 3 points) based on
value creation rather than hourly estimates.
Points are allocated by campaigns and goal type
(i.e. brand, leads, sales, loyalty), and therefore
always tied to performance.
Points provide total transparency into pricing,
progress, performance and resource allocation.
point pricing basics
Every point has a purpose.

@paulroetzer
builders
60%
drivers
40%
sample monthly gameplan

Campaigns Points Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Foundation 162 71 57 34 0 0 0 0 0 0 0 0 0
Lead Gen Strategy (Audience #1) 21 21
Brand Analysis 21 21
Marketing Budget Analysis 8 8
HubSpot Demo & Strategy 5 5
Contact Database Analysis 3 3
Blog Editorial Calendar 13 13
Lead Conversion Strategy 21 21
HubSpot Integration & Onboarding 13 13
Website Conversion Optimization Strategy 5 5
Agency Matrix Management Strategy 5 5
Google Analytics Dashboard Setup 8 8
Social Strategy Review 5 5
Brand Awareness Strategy 34 34
Lead Gen (Audience #1) 375 0 50 25 15 60 25 15 60 25 15 60 25
Lead Gen Campaign #1 100 50 25 15 10
Lead Gen Campaign #4 75 50 25
Lead Conversion 300 0 0 50 25 15 60 25 15 60 25 15 10
Lead Conversion Campaign #1 100 50 25 15 10
Brand Building 327 16 16 16 31 31 31 31 31 31 16 16 16
Blog Posts (4 per month) 192 16 16 16 16 16 16 16 16 16 16 16 16
Brand Building Campaign #1 45 15 15 15
Management 120 10 10 10 10 10 10 10 10 10 10 10 10
Monthly Campaign Scorecard Report 60 5 5 5 5 5 5 5 5 5 5 5 5
Monthly GamePlan Review Session 24 2 2 2 2 2 2 2 2 2 2 2 2
Weekly Activity Reports 36 3 3 3 3 3 3 3 3 3 3 3 3
Client Calls and Emails (Included) — — — — — — — — — — — — —
12-Month TOTAL Estimated Points 1,284 97 133 135 81 116 126 81 116 126 66 101 61
MONTHLY Budget @ $140/point $14,980
sample 12-month program
Chart shows Point values for hypothetical 12-month program

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sample content campaign
Project Points
Ebook with Design 55
Landing Page 2
Email Nurturing (x4) 8
Case study 8
Blog Post (x3) 12
Social Shares 2
Social Ads 13
TOTAL 100

@paulroetzer
www.pr2020.com
every campaign is a series of projects designed to achieve a goal
sample campaign center

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www.pr2020.com
sample campaign center

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sample point pricing value chart
Standard Point Pricing project value charts are built into online client centers

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assigning point values
Agencies can’t accurately predict hours due to variables
such as professional competency, focus, efficiency and
forecaster bias.
The higher the number, the more uncertain the forecast.
The Fibonacci sequence reflects this uncertainty.

@paulroetzer
assigning point values
The sequence represents a set of numbers that increases
roughly based on a fixed ratio of 1.618—the golden ratio.
Each subsequent number is the sum of the previous two—1,
2, 3, 5, 8, 13, 21, 34, 55 . . .

@paulroetzer
We’re still very early in the process,
with significant iterations in the works . . .
@paulroetzer

@paulroetzer
But we can already see positive impact on productivity,
accountability, client performance, agency growth and profits.
@paulroetzer

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considering a pricing model transformation?

@paulroetzer
pricing model considerations
What are the weaknesses of your current model?

@paulroetzer
What are the agency (and client) goals for the new model?

@paulroetzer
What services does your agency provide that can be
standardized (i.e. description, scope, price)?

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What is your agency’s value metric?

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What is the price per X (X = your value metric)?

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Does the price per X vary based on service package level?

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Should you publish your pricing?

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Will the model work within your existing
project management, time tracking and accounting software?

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Are there options to beta test the model?

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How and when do you introduce the new pricing model to clients?

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How do you ensure loyal clients receive equal or
greater value in the new model?

@paulroetzer
How do you benchmark and monitor impact on performance—
clients, agency and personnel?

@paulroetzer
“The future belongs to dynamic agencies with more efficient
management systems, integrated services, versatile talent,
value-based pricing models, a love for data, and a
commitment to producing measurable results.”

paul roetzer, @paulroetzer
CEO | PR 20/20
creator | Marketing Score & Marketing Agency Insider
author | The Marketing Performance Blueprint (Wiley, 2014) &
The Marketing Agency Blueprint (Wiley, 2012)
www.pr2020.com

INBOUND15
Remington Begg
CEO & Founder
Impulse Creative
Panel Discussion: Room 108
Carman Pirie
Principal
Kula Partners
11:45 AM – 12:30 PM

Paul Roetzer - Point Pricing

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