Ogilvy on pricing

Back in the old days, when ad agencies made most of their money from a standard 15% commission on media costs, advertising legend David Ogilvy wrote an open letter to prospective clients. “Insist on paying 16%” to your ad agency, he suggested. “The extra 1% won’t kill you, but it will double the agency’s normal profit, and you will get better service.”

Pretty arrogant stuff, coming from the guy who got the profits.

I don’t know if David Ogilvy ever found a client who insisted on paying him more than he asked for. But I’m pretty sure he never accepted a penny less.

Maybe he lost some prospective clients over his hard-line position on pricing. But in the end, he did all right. He retired to a castle in France. And his old agency is still getting by. Last year, Ogilvy and Mather billed around $10 billion. Let’s see, 1% of $10 billion works out to … a whole lot of better service.

The point is, David Ogilvy knew that price wasn’t what his clients cared about. They didn’t want Everyday Low Prices from the local Ad-Mart. They were looking for value.

The same is true of any customer – at least, any customer who’s worth having. And in the long run, a fair price gives you the opportunity to deliver extraordinary value to your customer.

Lots of good customers will test you on price. They’ll ask for that discount, happily take it if you cave in … and then wonder why they’re not getting the level of attention they expected.

So do right by your customer. Insist on getting the price you deserve.