The Most Common Agency Pricing Mistakes, With Kristen Kelly
About This Episode In this episode of the Agency Profit Podcast, Marcel is joined once again by agency operations expert Kristen Kelly to break down one of the most misunderstood and impactful levers in agency profitability—pricing. Together, they uncover the six most common pricing mistakes agencies make, from “vibe-based” guesswork and undercharging, to choosing the wrong pricing model and ignoring overhead. Kristen and Marcel share practical tools, mindset shifts, and tactical advice—like using delivery margin as a pricing benchmark and the clever $0 change order technique—to help agency leaders price with confidence and clarity. Whether you’ve been flying blind on rates or struggling to raise prices, this episode offers an actionable framework to get your pricing strategy aligned with profitability.
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Show Notes
Points of Interest
- 0:00 – 0:13 – Introduction: Marcel Petitpas introduces the importance of pricing in agency profitability, emphasizing that even great delivery and project management can’t compensate for poor pricing strategy.
- 1:00 – 1:39 – The Problem with Pricing Guesswork: Kristen Kelly explains that most agencies lack a formal pricing framework, often relying on gut feelings, competitor comparisons, or outdated rate cards.
- 2:09 – 3:49 – “Vibe-Based” Pricing Explained: Marcel highlights how pricing decisions are frequently made without math or structure, leading to unclear expectations and poor profit outcomes.
- 4:00 – 5:35 – Budget-First Pricing Pitfalls: Agencies that accept client budgets without recalibrating scope or checking for margin risk setting themselves up for failure from the outset.
- 6:27 – 7:46 – Undercharging and Overdelivering: Many agencies underestimate the margin needed for true profitability, aiming too low and failing to account for overhead, unutilized time, and business costs.
- 9:00 – 10:33 – Scope Creep and the $0 Change Order: Kristen and Marcel discuss strategies for managing out-of-scope requests, including the effective use of $0 change orders to maintain boundaries.
- 11:43 – 14:20 – The Right Way to Factor in Overhead: Marcel breaks down how to incorporate overhead and indirect costs into pricing without overly complex calculations or flawed net profit heuristics.
- 16:15 – 19:49 – Choosing the Right Pricing Model: Using the Agency Pricing Quadrant, the episode explores how risk and value should guide pricing models—ranging from hourly to value-based strategies.
- 19:53 – 22:34 – Tracking Average Billable Rate (ABR): A simple but powerful metric, ABR helps agencies estimate delivery margin and benchmark performance across services and projects.
- 22:56 – 25:09 – Overcoming Fear of Raising Prices: Kristen and Marcel debunk fears around increasing prices, offering strategies for timing and managing legacy client transitions.
- 25:21 – 26:54 – Delivery Margin as a North Star: The key takeaway: aim for a 70% delivery margin when pricing services to ensure room for overhead, profit, and sustainable operations.
Show Notes
- Connect with Kristen via LinkedIn
- Free Agency Toolkit
- Parakeeto Foundations Course
- Free access to our Model Platform
- Pricing Calculator
- Pricing & Scoping Episode
- Pricing Model Quadrant
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