Billing Practices: Billing models that pay off for both sides

Billing can be a complicated and touchy issue, but many firms have designed formulas to satisfy the unique needs of their clients. Anita Chabria uncovers some of them

Billing can be a complicated and touchy issue, but many firms have designed formulas to satisfy the unique needs of their clients. Anita Chabria uncovers some of them

"People don't like to buy services," says Neil Myers, president of ConnectPR. "There is no real agreement on what you are going to get."

That fundamental truth applies to pricing and billing for PR. It's a subtle profession where the results are often hard to measure, and it takes time for the impact to fully be seen. But more and more, clients are demanding to know up front exactly what it is they can expect to receive for their money. In turn, agencies are looking at new and better ways to give clients measurable results that can be tied directly to billings.

That trend is leading to fresh ways to structure agency/client relationships, but little in the way of consensus across the industry as to what exactly the best billing practices are. From pay-per-placement models to traditional retainers, almost every agency head has a strong argument as to why his or her billing practices are the best.

However, one thing most PR experts agree on is that clients are in the power position these days, and agencies need to adapt their practices in order to meet corporate expectations.

"After the downturn, when clients started coming back, they came back feeling a little more in control of the process," says Myers.

For those in-house, exerting that control has meant a renewed emphasis on hard metrics that can justify the bills to top management.

"Nowadays you need to show deliverables," says Renee Reyes, marketing communications manager of Sunnyvale, CA-based software company MontaVista, a ConnectPR client. "Everything is based on delivering and accomplishing."

As part of that push toward accountability, many agencies say they are seeing clients move away from retainers and show an increased interest in project work as a way to better manage billings and budget. Even with agencies and clients that have an AOR relationship, many clients are requesting that work be broken down into definable projects that are individually tracked and budgeted.

"This will lead you to carefully estimated projects and set budgets," notes Jerry Swerling, director of PR studies at the USC Annenberg Strategic Public Relations Center and a PR search consultant.

Some firms are even coming up with set pricing models as a way to give clients hard, unbreakable budgets.

At Lewis PR, there is a "menu of services" that allows clients to know exactly what a press release or event set-up will cost in advance. The firm then sticks by this price no matter what, says GM Steve Capoccia. ConnectPR has a similar model, giving clients the "predictability" they need, says Myers.

"At the beginning of the month, we set out every little project we are going to do for them," explains Myers. "It does not matter if it takes us 20 minutes or 20 hours to set up. We just tell them ahead of time what it is we're doing and what it will cost. Fundamentally, it's a more honest approach."

An extreme version of the pay-per-project billing method is the pay-per-placement idea for media relations. Califon, NJ-based PayPerClip PR only charges clients after it has secured a broadcast or print placement - and then promises a full refund if the client is

not happy with the final article or show.

PayPerClip wants its clients to have the security of working with the firm toward a goal without any up-front expense. The agency charges $4,000 to secure one segment on a cable show and $5,000 for a feature in a women's publication, for example, but only after it has already put in the time and internal expense of doing the legwork.

"Our pricing model is on our website," says MD Richard Virgilio. "The greatest part is that there is no risk."

But even Virgilio admits that the model will not work for every company and that it is best suited for a media relations boost, rather than a strategic effort. "We're not saying that this is the perfect solution for everybody," he says.

Even agencies that haven't gone to the extreme of fixed prices are rethinking the traditional model of hourly billing based on seniority. Having different people charged out at different rates often leads to complex bills that drive clients crazy and force them to spend their time thinking about who at an agency they want doing their work.

That reality led Malden, MA-based Topaz Partners to create a billing system based on the complexity of the task, rather than on a hierarchy model of senior execs billing at higher hourly rates. That means that if a senior executive works on the fairly simple task of a press release, she may bill at Topaz's low-end rate of $75 an hour, but will up her price to as much as $180 per hour for strategic work.

"We wanted our senior executives to be able to touch the range of tasks on an account," says agency partner Tony Sapienza. "It seemed as if we were penalizing the clients for the tasks that we were having our senior people do."

No matter what billing model an agency chooses, the experts all agree that, when it comes time to ask for payment, there are certain rules that will always apply.

First, "your invoices should be really clear and self-explanatory," says Swerling. "A good practice is to make sure Excel spreadsheets show the clients where they stand on

a project-by-project basis, as well as a cumulative basis."

The experts also concur that any bill needs to be closely and clearly tied to the activities performed, but that doesn't necessarily mean a person-by-per- son breakdown.

"The last thing a corporate PR person wants is a large printout in 15-minute increments," says Capoccia.

And if there is one golden rule for billing, it's that you can't be too open with information.

"The best practice is to be transparent," says Swerling. "Provide as much information as the client wants in whatever form they want. Make sure there is no mystery. That's a problem that must be avoided at all costs."


Technique tips

Do be open and clear about what you are charging the client and why

Do think outside the box. Clients are constantly looking to justify PR costs, which might mean new ways of billing

Do know what competitors are doing. Industry practices are evolving

Don't overdo the bill. Make sure it's easy to understand

Don't be tied to hourly billing models

Don't allow a client to be confused. Mystery bills will lead to trouble

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