Creative Agencies have a slew of (black box) pricing models.

How we are using data to change black box billing models by Creative Agencies.

 

At Lazy Eight we love data, like Nutella level love. We identify, gather and then assess multiple data points over the time of an engagement. This enables us to build out a decision model that solely relies on data. Over the next series of posts, we will be highlighting different aspects of this decision model, and how the data we collect affects each piece. To kick things off, for this article we will start with our Sales Model.

Our Sales model is broken down into 3 simple phases of qualification:

  • Phase 1: Qualification using Data >  Estimate 1
  • Phase 2: Qualification using Industry Experience > Estimate 2
  • Phase 3: Qualification using Research > Estimate 3

This visual below should give you a good overview of these phases and how they are correlated in our Sales process.

The Lazy Eight Sales Funnel.

Phase 1: Qualification Using Data > Estimate 1

All new client leads begin with filling up our Estimator. Our Estimator is essentially a list of simple questions that allows us to hone into the scope and requirements of the client. Our system takes the results of the questionnaire and does a quick comparable analysis across previous projects we have completed.

Since inception, we have worked with over 200 clients across various industries and sizes. Most of our clients work with us on multiple projects, this has led to a ton of data for us to work with. Here is how we use the data for Phase 1:

Phase 1: Qualification Using Data

During the initial correlation, from a macro-level we look at the following factors:

a) Industry Vertical

b) Core deliverables (eg. Branding or UI/UX)

 

From a micro-level, we compare the following:

a) Core Visual (eg. logo unit, home page, etc)

b) Extensions (eg. brand extensions, website extensions, etc)

 

Once the analysis is complete the Client gets what we refer to as Estimate 1. This estimate typically has a delta of 15%-20%. And the client receives this estimate within 24 hours.

 

The purpose of Estimate 1 is as follows:

1) It gives the potential client a ballpark idea of how much an engagement like theirs will cost monetarily and time-wise.

2) It gives the potential client a granular breakdown of the milestones, how we would approach the engagement and how the team would be potentially staffed.

3) Most importantly it doesn’t waste either party’s time. (eg. From our end no human is involved during this phase).

Example of Estimate 1 as a result of Phase 1.

Phase 2: Qualification Using Industry Experience > Estimate 2

Phase 2: Qualification Using Industry Experience

Once the potential client gets Estimate 1, we also pre-schedule a call with a Planning Principal based on the client's availability captured from the Estimator.

Our Planning Principal digs into the brief and revises Estimate 1 into Estimate 2. This new estimate is typically structured as per requirements and priority. Our Planners also guide our clients in versioning out engagements by honing into and defining the various phases and removing unnecessary ones currently not required by the client. Estimate 2 ends up with a revised delta of 5%-10%. (Typically Estimate 2 is also about 10-15% less than Estimate 1 with respect to Lazy Eight Hours* consumed).

 

Phase 3: Qualification Using Research > Estimate 3

Phase 3: Qualification Using Research

This phase occurs once the client is engaged. We call this phase Spec Research. During the Spec Research Phase, the Engagement Principal (your project manager) digs into the scope and lays out a final scope of work for our clients as well as the internal execution team. This is based on research, namely the following:

1). A comparable analysis.

2). Persona analysis.

3). Basic brand and / or website architecture analysis.(eg. Brand extensions definition, Site Map generation, etc)

This estimate (Estimate 3) has a delta of 0% and is then converted into your Project Planner and execution begins. Estimate 3 (now Project Planner) is updated on a real-time basis and a summary report is sent to our clients every Monday.

 

Why does a Transparent Sales Model Matter?


Estimates should be size / brand agnostic. Eg., Many agencies will price based on a “Whale multiple”, eg if a Whale (large corporate client) comes through the sales funnel, typically it’s a 3-5x markup for them for comparable work. When a promising startup comes in ("baby whale" ie. with a round of funding in the horizon), the multiple will drop but the engagement will be anchored to a contract for a longer period of time, where the startup (once it gets funding) gets billed to cover the initial hit, often times with unnecessary projects pitched by the agency.

We hated this approach, hence we decided to build our own data-
driven transparent model.

*We believe great work can be measured. We measure it using a currency we have built called the Lazy Eight Hour and measure/report it using proprietary tools we have built in house. Over the next few posts, we will be digging into each of these and how they factor into our overall Decision Model. Stay tuned :)