Want to Demand Premium Prices? Then Innovate

An Ad Age Editorial

Published on .

As consumers around the country dig themselves out of various blizzards, the marketing, media and advertising industries find themselves forced to find a way out of the hole they've dug for themselves. Namely, after a few years of value pricing brought on by recession, they all need to find a way to get customers to pay for what their work is worth.

It won't be easy.

Ad agencies likely won't see more money from simple spending increases because they've slashed rates as the pendulum has swung (perhaps too far) in the favor of procurement. Many marketers -- food, packaged goods, beer, restaurants -- have either put the brakes on innovation or have so trained consumers to expect discounts that the thought of asking them to pay full price for anything seems tantamount to heresy. Just ask the media industry.

But there is a way forward. The answer is as old as it is simple (in theory if not in execution): innovation.

As we reached out to various sectors in the industry for our 2011 outlook story, the answers kept coming back around to innovation.

It could be a matter of agencies turning more and more to intellectual-property projects -- proprietary tools and software they create, own and sell. "This year will be one in which agencies will spend a meaningful percentage of time producing their own platforms," said Andrew Essex, CEO of Droga5.

It could be media companies relying less on ad revenue (not that they have a choice) and acting more like marketers. "They'll continue to move into below-the-line services. ... I think more media companies like Hearst and Meredith will invest in real stand-alone businesses," said Tolman Geffs, co-president of consultancy Jordan Edmiston Group.

It could be the beer industry realizing that craft brews can demand higher prices because, well, they taste better.

Whatever the case, you won't be able to charge more for the same services you've been discounting for the past few years.

And for those protecting their turf, hoping this is just part of another boom-and-bust cycle, we'll leave you with the words of SapientNitro's Gaston Legorburu:

"There are no blue skies ahead for anyone who resists change and focuses all of their efforts on protecting the status quo."

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