AI has shown up the measurement barrier to value pricing for public relations agencies
The conversation about AI and agency pricing is important but it's focused on the wrong problem.
The agency market is facing a structural challenge as it plans for 2027. AI reduces the time it takes to do the work and is breaking the billable hour model.
Traditionally, agency time was budgeted against a task. But, setting aside the argument that AI is pushing work up to senior people, laid out in last week’s newsletter, AI has blown apart this link.
This should be the disruptive opportunity agencies have needed to stop selling time and start selling value. But value pricing requires agency and client to agree what value looks like and, I’m afraid, this is where public relations practice fails.
The argument isn’t new
Both of the agencies that I co-founded priced work based on time. We used rate cards, timesheets and utilisation targets. Projects were costed using the unit of time and retainers bundled this into repeatable monthly activity. Most agencies still operate this way.
I don’t think that anybody ever claimed that the billable hour measured value, but it was predictable, clients and procurement alike understood it, and it was easy to administer.
Crispin Manners, himself a veteran agency entrepreneur, tackled this issue in his excellent book How To Sell Value- Demystified. He says that the time-based model is flawed and fails to capture the value of our work.
A deeper reading
My doctoral research at Leeds Business School examines the conditions under which public relations is recognised as a management function. Pricing is one of those conditions. The issue is well explored within management and professional services literature, but unsurprisingly it is thin in our discipline.
The basic argument is that an agency that sells hours is positioning itself as a supplier of labour, whereas an agency that prices against organisational outcomes is positioning itself as an adviser to management.
The agencies that are making this shift frame their work around commercial priorities, relationships, risk and cost savings. In other words, the language of management, and not the language of content or media.
The enterprise value contribution of public relations is an urgent and underdeveloped area of practice. We’ve spent 20 years measuring outcomes. We need to apply the same rigour to value.
It’s great to see the PRCA making the case for public relations as a driver of enterprise value under the leadership of its CEO Sarah Waddington. And yes, by way of disclosure, Sarah and I are still married.
Here’s where to start
There is a body of work that describes how other professional advisory functions have made this transition. Here are some of the key arguments.
Differentiate your proposition
Price judgement on value
Agree outcomes before you agree fees
Use outcome fees only where outcomes are measurable
Invest in attribution
Separate pricing from capacity planning
Productise repeatable work
The value question is the pricing question
AI is making the billable hour indefensible, but it hasn’t made value pricing any easier. The agencies that solve measurement will earn the right to price on value. The rest, unfortunately, will find themselves negotiating AI discounts.
I’m supporting agency and in-house teams with planning for 2027. If you’re looking for a provocative speaker, workshop host, or professional advisory support, please drop me an email.
Further reading
This article was originally posted on my Substack. The Wadds Inc. newsletter is read by almost 6,000 communications and public relations practitioners. We take a slower, critical perspective on the research, evidence and developments shaping the field. We put evidence before opinion, and we say how confident we are in what we publish.
