The Future of Agency Revenue: Products, Price Tiers, and an AI-powered Chief Pricing Officer
Most agencies are unknowingly leaving money on the table due to ineffective or non-existent pricing strategies or simply due to the challenges associated with selling billable time. Others have wisely adopted a product-based revenue model, which is a game-changer, enabling these firms to deploy various pricing tactics for rapid revenue growth. Yet, even with these advantages, many of these agencies still find themselves in need of expert guidance.
Unfortunately, most firms lack a dedicated pricing strategist and expert negotiator, leaving them vulnerable to savvy procurement professionals and price-driven buyers. They may not have the training or experience to identify the motivations of different buyer types they could be selling to and, therefore, how to price and negotiate to achieve the best outcome with their buyer.
That's why I designed a ChatGPT prompt that turns GPT into an expert pricing strategist and negotiator for agencies--a virtual Chief Pricing Officer if you will.
I'll share how I did it and the prompt for you to use. But first, let's explore some of the power agencies can gain from a product-based agency model combined with tiered pricing—a foundation you'll need to fully leverage this GPT tool.
Strategic advantages of a product-based model and tiered pricing
One essential pricing approach that product-based agencies can easily use to maximize their revenue is tiered pricing. In a productized agency, tiered pricing is not just a pricing strategy; it’s an integral part of the business model, enabling more targeted problem-solving for clients. The GPT prompt is optimized for agencies using this approach, but any agency can edit the prompt to adapt it to their pricing model.
Productizing agency services means identifying the highest-value problems an agency can solve for clients in a reliable, repeatable, and scalable manner and packaging the firm’s proven approach as solutions, programs, and products. The repeatability factor requires some standardization, which lends itself to a tiered pricing strategy.
To provide an example, I asked GPT to create three productized tiers of service an agency might offer for brand awareness campaign work. Here’s what it created, which I put into table format for presentation.
Three additive service tiers for brand awareness campaign work that an agency might offer, created by ChatGPT-4.
When agencies package their intellectual capital as different bundles, they communicate their confidence in their approach while also being able to balance standardization with customization in their service offering.
Creativity, customization, and high-touch service
Some agencies hesitate to adopt a product-based model due to a common misunderstanding: they fear it will turn their unique, tailored services into 'off-the-shelf' solutions that restrict creativity and prevent customization. This limited view often stems from a misconception that productization means adopting a nonnegotiable cookie-cutter approach for the sake of scalability. However, this couldn't be further from the truth when the model is designed to accommodate flexibility.
Looking at the example above, each option outlines a tailored approach to achieving a different target outcome. When agencies present their work in this way, they communicate a strong unique perspective on solving client problems as experts in their space. This is critical in today’s market, as Tracy Allery, Nestle’s Director, Marketing Procurement Business Partner, explains in MarketingWeek:
“The better agencies aren’t shy about saying, ‘This is what we do and this is what it costs.’ They’re not in the bargain basement space, so they’re confident about the impact their work will deliver. When agencies don’t have a clear perspective on selling their work versus selling hours, then procurement, through a competitive review or other assessment, will tell them how to price.”
Creativity
Creativity can also still flourish within each scope item as it usually would. The defined scope builds in and protects the time a team needs for proper strategic and creative thinking.
Customization and high-touch service
Agencies can also include customization and high-touch service, as the example demonstrates from option 1 to option 3. When discussing service tiers with a prospect, agencies can also offer to mix and match "products" from each tier to create a fourth option. They can also offer "add-ons." The individual products would still be based on a proven approach, so the firm still delivers with the same or similar effectiveness and efficiency.
Let's look at a real-world example from Perfect Machine, which specializes in post-production editing services for small to midsize agencies.
Their tiered subscription model goes from basic to high-touch as you climb each tier to get to their live edit sessions. It offers a good blend of standardization and customization.
There are many other benefits to using a tiered pricing structure, but I think I’ve shared just enough to demonstrate how the ChatGPT prompt works.
ChatGPT as a virtual Chief Pricing Officer
Get ready to meet your ChatGPT-powered virtual Chief Pricing Officer.
As an experiment, I designed a prompt that turns ChatGPT into an expert pricing strategist and negotiation advisor. Here's how.
Step 1: UNDERSTANDING THE BUYER
Agencies should be prepared to adjust their selling style to appeal to their buyer’s motivations to gain an edge when pricing and negotiating. In my prompt, I ask GPT to ask about the buyer to help assess who they are in terms of the following: their likely motivations, tactics they’ll use, the strategy I should use to negotiate, how to negotiate if I'm using a value-based approach, the potential objections I should expect, and how to adapt and win.
Step 2: Defining what ChatGPT should do
I've read and tested a variety of impressive ChatGPT prompts over the past year. The prompts that are designed to teach something are most interesting to me, so I borrowed some of the structure from OpenAI's Teaching with AI page to write mine.
When it works as intended, GPT will do the following for the agency prompt user:
It will introduce itself as a helpful pricing strategy and negotiation advisor—a virtual Chief Pricing Officer
It will ask up to five questions to learn how it should provide advice. One will be about the buyer's business. Another will be about the buyer’s behaviors, comments, or questions to assess who they are and how to negotiate. Another will ask for the agency's tiers of service and the pricing and payment terms the agency is proposing. If you plan to use this prompt, have this information ready. If you want to test the prompt without this, you can make it up as you go or ask GPT to propose something for you as a hypothetical situation.
It will advise whether an agency should adjust its tiers, pricing, and payment terms based on the buyer’s information.
It will also provide a probability for which tier a buyer will choose, helping agencies refine their pricing strategies to meet everyone's goals.
Step 3: Testing
To test the prompt, I played the role of an agency's new business person and copied/pasted the prompt. Here are the results I received. Just know that your responses will differ based on the version and plan you use (I use the Plus plan and GPT-4), the information you provide, the enabled plugins, and whether you use the custom instructions feature.
Here’s a link to view my discussion with GPT. In case GPT is unavailable, I also shared some screenshots below with some explanation.
I was brief with my reply. If you provide more background, you’ll receive much better answers than what I share in this post.
Again, I encourage you to share more details than I provided, but I suggest you leave out any real names or other sensitive information or turn on privacy settings. You should also review ChatGPT’s terms and policies to help you decide what information you are comfortable sharing.
These are the same service tiers I shared earlier created by ChatGPT-4.
GPT renamed and fine-tuned my pricing tiers by considering my buyer, applying established pricing principles, and reflecting the value of each tier. The feedback is interesting, but I highly recommend doing much more here, such as:
Ask GPT to explain more about its adjustments and rationale to gain richer insights and new pricing strategies you may not have considered.
Ask how you can further fine-tune your work to improve the purchase probability for one of the options.
Ask it to teach you about the different pricing principles it considered in its evaluation.
The more questions you ask, the more value you will gain for your newly hired Chief Pricing Officer. See for yourself. You can continue the pricing conversation I started with my Chief Pricing Officer with this link if you already use ChatGPT.
What does this all mean?
ChatGPT can be a powerful tool for agencies seeking to learn how to improve their pricing and negotiation tactics to maximize their agency’s revenue. However, it's crucial to remember that this technology complements, not replaces, human expertise. Agencies will still need someone with deep-seated pricing knowledge, real-world experience, and discerning judgment on the keyboard to avoid potentially costly mistakes. For instance, in the example above, mischaracterizing my buyers could lead ChatGPT—and me—down a path that could jeopardize the deal. Only real experience can guide someone to ask the right questions and critically evaluate GPT’s advice.
Now it’s your turn. Continue the pricing conversation I started with my Chief Pricing Officer with this link if you already use ChatGPT. Consider auditing your current pricing processes and strategies to identify where ChatGPT could add value. Then, try testing the prompt with a small project proposal. Edit the prompt however you need.
Let me know how it goes.
