Hb-STUDiO Blog | Do not play the price war game when choosing a digital agency | Be careful of commoditization
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$$ — Don’t play the price war game! — $$

29 September 2015

The industry is saturated with digital agencies, and it’s often hard as a client to pick the one you want to trust and work with. Some are great marketers and storytellers but don’t have enough depth to convince you. Some others look super professional and are all about processes, but don’t seem to have the ability to surprise you with innovative thinking. At the end, clients often decide to go with the most affordable proposal and that’s it. Finding something within their budget and having the work done for less is what will convince most of the clients, but what is really important is the leverage and long term value.

There is nothing more boring than an industry where most of the choices are done based on price. Look at airline companies, they don’t provide any value, don’t even treat us as clients anymore. The one that is the less expensive is the one who wins the client. It’s fine, because the client’s goal is only to go to point A to point B, but is the same model really relevant to what we are trying to achieve when outsourcing a key project to a digital agency? Be careful of commoditization!

A lot of agencies can execute what you have in mind, no more no less, without bringing any additional value to your concept. If a client is simply looking for basic execution skills, that might do the job. But if a client is looking for a new concept or strategy, that is a totally different project and this has technically no price in $$$. The outcome will be a subtle combination of unique vision, conceptualization, experience, creativity, and execution. This is literally priceless. Like art or music has no price. The problem is that in today’s world, we have to put a price on everything. When commodities prices are regulated by demand and offer, the prices for creative works, conceptualizations and strategies are virtually being set by other criteria.

  • Reputation of the agency / brand equity
  • Their ability to story tell and their message
  • Previous clients and projects
  • etc…

For example, a digital agency that works with Coca Cola or Ford will obviously be more expensive than an agency that works with New York based SMBs, and you, as a client will have no doubt of their ability to successfully execute your project. But on the other hand, they will be full of processes and you will loose that craziness you were looking for, the ability to surprise you. Sometimes the lack of processes is a good thing and as SMBs we all need to take risks in order to build strong brands. Fortunes 500 are too established to take those risks and agencies that target them are highly restricted in terms of creativity and strategy.

The questions is: why these agencies are five time more expensive than others? Because the price is actually IRRELEVANT. What’s really important is the value they will bring to you. Basically the selection process should work this way:

1- Select your agency based on the value you think they can bring to you.

2- Then, look at the price, if it’s in your range go for it. If it’s not, try to measure that value in terms of long term ROI, that might make you consider getting more budget for the project. If that’s not possible, downgrade your expectations in terms of value and repeat.

Not the other way around.

Tip: young agencies often bring disproportionate value to their client as a long term strategy to have their brand stand out and ROI on the happy customers who spread the words. That might be a good arbitrage for clients.

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