Make Money in Interactive: Seven Tactics

Pricing yourself out of business in tough times? Interactive needs an economic model not based on traditional agency billing.

When I run into colleagues, it’s always the same: “How do you make money in interactive?” Clients don’t want to pay for the work it takes to assemble a campaign. Big, new projects hardly come in. If they do, they aren’t profitable. How to survive?

Get paid for thought.

Understand you’re in a service industry (most of you are). You’ve got one asset that matters: your mind. Manage it. Equipment, technology, your portfolio… all of these are useful, but none directly provides what you need to make a living. Take the stuff away and you’re left with your noggin — the one tool that matters.

Your brain keeps you in business. Charge for its use and make money. Give it away and you’re screwed.

How do you get paid for thought? First, change your mindset, especially if you’re from traditional advertising. Agencies pride themselves on “strategic thinking,” “account planning services,” and “brand consulting practices.” The simple fact is they are usually paid as if they’re production houses or media agents (they were, hence “agency”).

Money was (and is) made at agencies through commissions on media, markups on production, and “account service” (often project management). There’s a schism between what’s held up as valuable (thought) and what’s paid for (production). The arrangement works because there are many steps between concept and execution, ergo many ways to get paid along the way.

Guess what, folks. The Web don’t play that way.

The online world has few steps between concept and execution. Because many of us use digital tools to think and conceptualize, there’s hardly a gap between intention and action. If someone asks you to mock up a banner and show how the animation will work on the Web, once you’ve done the mock up the banner’s finished. There’s no difference between concept and the finished piece. The banner animates. It’s a GIF. You can put it online today.

Ditto email: Once written, it’s basically done. It ain’t like traditional direct mail where there’s production time between creation and deployment to mark up.

Although there’s little or no gap between mockup and final in interactive, the work still requires as much thought as always. Maybe more, as regards multimedia and technology. The value is the same as traditional, but opportunities for making money on production bottom out.

Shift the “pay for production” model and mindset to “pay for thought” internally and with clients and prospects.

Here are seven practical ways to get paid for thought:

  • Avoid spec work. If you charge for thought then give it away, what message do you send about its value? Spec work is a relic of the old world — print and TV — where an idea had many iterations before layout and finished product. In the digital realm, spec is the final work. If you do spec, you may never recover the cost.
  • Bill projects; don’t use retainer or “time and materials” pricing. Intuitively, it may appear better to be paid on a retainer basis. But retainers can result in money-losing relationships and an account service death spiral. Projects are beneficial to both parties. They provide incentive for speed and efficiency on the part of the vendor and give the client peace of mind because they know the cost exactly. But…
  • Charge a weekly retainer for project management. You’ve probably endured The Project That Wouldn’t Die. Unfettered from print deadlines and the finality of becoming a physical product, digital projects can go on forever with endless tweaks, delays, and adjustments. With a fixed fee, this can be disastrous. The solution is a weekly retainer for project management. It provides a client incentive to cut internal delays and shields you from problems beyond your control.
  • Avoid money-losing sales tactics. Charging below normal rate to lure new business never works. It might seem to make perfectly good sense: “We’ll get ’em by undercharging,” you say, “after they see how great we are, we’ll make it up on future projects.” Baloney. If they get it cheap now, why the heck would they pay more later? They’ll move on to another sucker. You’ll lose money and a client. You’re better off without them.
  • Be upfront about pay for thought. Why beat around the bush? You know your brainpower is valuable. Let clients know, too. Tell them you charge for “strategic consulting,” “discovery,” “account planning,” or whatever you want to call it. If they’re unwilling to pay, they’ll probably be unprofitable clients anyway. Forthrightness becomes a differentiator, a value-add, something that sets your company apart from the pack. Don’t you value things you paid for more than things you got for free?
  • Deliver deliverables. What do you call people who routinely get paid for thinking? Consultants. Their product? Deliverables. Along with pay for thought comes the responsibility of communicating to clients. If you want to get paid, show what they’re paying for. Yes, it can be a pain, but that hardcopy report is valuable to everyone: to you for your own communications purposes and to your client so they can prove to their boss the company got what it paid for.
  • Make time tracking an obsession. Price pressure is fierce. Many are lowering costs to stay competitive. Fine, but you’ve got employees to pay. How do you avoid pricing yourself out of business? Don’t overdeliver. Consulting, creative, whatever — the fastest way to lose money is to give clients more than they pay for. Get a time-tracking system. And use it.

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