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What impact will AI have on time-based agency fees?

We asked agency chiefs what they thought about AI and agency fees and the resounding answer is that AI means the death of hourly billing, which has to be a good thing. We also hear from one AI consultant about what he is hearing from agencies, and not surprisingly, his view is that AI is definitely having a positive effect.

Good riddance to time-based fees

Paul Stollery, co-founder and creative director at PR agency Hard Numbers: "Time-based business agency fees are done for. And good riddance.

“The client never cared how long it took you to secure a piece of coverage. The agency did; because it was the easiest way to justify a line item on the invoice. But that is about to become a double-edged sword, as time in the scope of work will be very easy to question and remove once AI-driven content production reaches its maturity.

“Humans have a habit of overestimating the impact of new technology in the short run and underestimating it in the long run. In the short term, there'll be lots of optimists, but seemingly little impact on the day-to-day running of our business. Long term, agencies that sell time, rather than value, will be those most at risk of seeing their revenue lines lost to automation."

Andrew Bruce Smith, founder of AI, PR and marketing agency Escherman: "Time-based billing will go the way of the dodo. Why? Because the integration of AI into PR business processes is set to profoundly impact time-based agency fee structures. With AI's capability to expedite tasks, the hours traditionally billed could reduce drastically. This increased efficiency might shift agencies from hourly rates to value-based pricing, emphasising the value delivered over time spent. Concurrently, agencies can leverage AI to introduce novel services, opening new revenue avenues. 

“This evolution demands professionals upgrade their skills, focusing on strategic roles. Enhanced transparency becomes possible, ensuring more accurate billing. Smaller agencies could challenge larger counterparts using AI, leading to competitive pricing. Ethical questions, such as charging clients for AI's quick tasks at human-hour rates, will arise. As clients' expectations shift, agencies will need to recalibrate their offerings, whilst also grappling with potential job displacements due to automation."

Embrace value-based pricing

Shalon Kerr, founder of healthcare PR firm, PR-it: A major industry dilemma is whether hourly billing is still the right approach for agencies. Why should a client only be on the hook for 15 minutes of advice that I've honed over 20 years, or a five-minute introduction to a network contact that could potentially be worth thousands for them? Whilst AI can certainly expedite many agency tasks like content development, it can't replace the counsel, strategic thinking, creativity and relationship-building that are essential for executing successful campaigns.

“I've always found it perplexing that agencies haven't embraced value-based pricing, which aligns client and agency goals. As AI continues to advance, the idea of billing by the hour becomes increasingly outdated, especially when it comes to tasks like news monitoring, analysis, reporting, and meeting minutes, which AI can handle almost instantly, compared to the hours it used to take junior staff.”

AI should help agencies charge more

Debby Penton, CEO of PR agency Wildfire: “PR people are multi-skilled professionals: writing, researching, pitching, being creative etc. The job has got harder and harder over the years as the media moves faster and we need more time to manage more channels and use more tools. Using AI to help create efficiencies in those tasks just makes sense. And it’s not a choice. AI is being woven into all the tools we already use. We didn’t drop our fees when we moved from fax to email, or paper-based media directories to online databases, and that shouldn’t be any different now. If anything the smart agencies really embracing AI should be charging more, as they’ll be able to deliver more by the hour than anyone else and have more time for strategic high-value consultancy.”

Costs are coming down

Lisa Rehurek, founder and CEO of firm RFP Success Company:  Whilst there might be an initial investment required for AI technology integration, its long-term benefits translate into substantial cost reductions. AI-driven automation optimises various processes, leading to streamlined operations and decreased resource requirements. These cost savings can be reflected in client fee structures, either through lower fees, which make the agency more attractive, or by bolstering profit margins.”

Increased transparency

 Lisa Rehurek: “AI's analytical capabilities usher in a new era of reporting and transparency. Real-time insights, derived from AI-driven data analysis, enable agencies to provide clients with comprehensive and up-to-the-minute reporting. The increased transparency can instil trust and confidence in clients, potentially justifying higher fees as clients recognise the value of having access to such timely and detailed insights.”

View from AI consultant

 AI gives agencies creative freedom

David Hart, communications, marketing and business development consultant at AI consultancy InferenceCloud: “Part of our pitch to agencies is that our AI solutions enable them to make a bigger impact for their clients by offering in-depth, research and data driven content, that also gives them more time to concentrate on the outside-in, creative thinking that defines the agency/client relationship. Agencies are facing up to the disruption created by the many AI tools coming to the market, but they should be wary of those offering fast content at low to no cost. Like most services of this kind, you get exactly what you pay for.

“I would also add that many clients are asking agencies for AI, or why the agency is not offering AI solutions, having been given KPIs by management to bring AI elements into their communications departments.”

There are a lot of scare stories out there about the terrible impact AI will have on work, life and just about everything we do, so it is encouraging that in one respect, agency fees, AI has the potential to make a positive difference.

There are further discussions about the impact of AI on PR here:

How AI will change the PR agency model

Working with AI to improve measurement can futureproof the PR industry

Why AI needs better PR!

Could AI take over the work of many PRs?

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