Sarah runs a growing e-commerce business. She needs more leads — and she's talking to two agencies about it.
Bob's Agency: The Cost-Based Approach
Bob is thorough. He breaks down every hour, every deliverable, every line item. His costs come to £20,000 and he quotes £25,000, walking Sarah through exactly how he arrived at the number.
Sarah listens politely. Then she thinks: "But I only thought this problem was worth about £10,000 to solve."
Bob's problem isn't his work ethic or his margins. It's that he anchored the conversation to his costs rather than her value. His detailed explanation of what the work costs him is completely irrelevant to what the outcome is worth to her.
She passes.
Tom's Agency: The Value-Based Approach
Tom starts somewhere different. He asks Sarah about her business — her average order value, her current conversion rates, her growth goals. Then he listens.
When he presents, he offers three options:
- Option 1 — Premium: £50,000 — full-service, guaranteed results, dedicated team
- Option 2 — Balanced: £28,000 — core channels, performance milestones
- Option 3 — Partnership: £10,000 upfront + performance fees tied to leads delivered
Tom explains his philosophy on Option 3: "We're willing to bet on our ability to deliver. We're asking you to share in the upside when we do."
He also challenges the hourly model directly: agencies that bill by the hour profit from inefficiency. The slower they work, the more they earn. A performance-based fee flips this completely — their incentive is to deliver results as efficiently as possible.
Sarah chooses Option 3.
The Result
Over four years, the partnership generates £247,500 in agency revenue. Sarah's business receives £1,330,000 in leads.
Both sides win. That's the point.
The Lesson
Clients don't care what something costs you. They care what it's worth to them.
When you price based on your costs, you're having a conversation your client isn't interested in. When you price based on the value you create, you're speaking the only language that matters.
Bob is not a bad agency owner. He's just asking his clients to solve the wrong problem.