AI may require PR agencies to reevaluate billing models

Michelle Olson remembers the early days of her PR career, when researching a complex crisis communications plan would take hours. It was worth it to the client, she said, which is why they were OK with having it all billed back to them.

Today, however, thanks to AI, that initial research can happen in just a few seconds. While Olson or her teammates at Lambert by LLYC still need to fact-check for accuracy, they can complete many tasks faster than they did even two years ago, thanks to ChatGPT, she said.

None of her clients are asking for adjustments to their rates right now, Olson said. But given the rapid advancements in these technologies, she feels now is the time for firms to start thinking about not only how they’re billing clients but also how they’re proving their value to them.

“It’s really about viewing this opportunity to highlight that we’re much more than just ‘doers’ of tasks,” said Olson, Lambert’s chief client officer and a fellow at PRSA.

A discussion 20 years in the making

Olson’s firm still bills “pure,” or the actual time it takes to complete a work item. “If we have a retainer-type arrangement with our clients, we still (build) an hourly rate into that retainer.”

But she and PRophet founder and CEO Aaron Kwittken both said there have been conversations for more than 20 years about finding models to replace billable hours as the dominant method.

“I think the reason for the use of billable hours is that we’ve either been scared of or can’t define what success looks like,” said Kwittken, a “recovered agency guy” who pivoted to comms tech in 2022.

Olson noted that a much-discussed concept has been the value billing model based on the impact of the work rather than the time it takes to complete.

For instance, a quality pitch to the Wall Street Journal may only take a five-minute phone call – or about $5 on a $100 per hour rate – but the value of that placement could be “priceless” to a brand, Olson said.

It’s common for agencies to build in a certain number of hours per month, but Olson noted that this approach has flaws. “Our services aren’t utilized that way,” she explained.

“We’re crisis communicators. We’re issue managers. There’s something that happens every month that we don’t count on, that a communicator needs to help with,” she continued. “The hours are going to ebb and flow.”

How to readjust retainers

On the client side, teams want as much value as possible, Kwittken said. As such it’s about ways to rethink the billing process to highlight the works that’s taking place beyond press releases and website copy.

“(Clients) want to fix their costs and don’t want them to creep because they have a budget,” he added. “They want to pay for performance, not just activity reports. They want to know what we did to help them achieve their goals, like sales or shareholder valuation.”

The emergence of this tech may give PR agencies a chance to “productize,” not commoditize, what they do and assign specific costs or values to each task, service or deliverable against objective success goals, Kwittken said. He gave the example of tying PR’s impact on sales, employee morale, shareholder value, etc. directly into their client’s CRM.

To that end, Olson sees the potential for PR agencies to go back to the negotiating table and really drive home what they bring to the table in terms.

Olson’s hope is that while they may bill fewer hours for a particular project, AI is creating more time “to be in our clients’ heads about what they worry about every day.” That means there’s more time to do the analysis of social media audiences or strategize about campaigns.

“With those extra two, three hours we can figure out how to make a bigger impact for the client, so that the client benefits from us,” she said. “Maybe that’s another brainstorming session about an issue that they hadn’t told us about yet, because we’re not scoped for that.”

As part of the process, Olson suggested asking clients things such as what’s keeping them up at night and how they can help.

“We have a chance to become bigger strategic partners as an agency,” she said.

Finding the right solution for your firm

Olson noted that there’s no true challenger to the billable hour system. In fact she’s known only three agencies that have gone to the value billing model.

Two of them don’t even exist anymore.

That doesn’t mean value billing or another system won’t work, she said. It also doesn’t mean teams should avoid AI for the sake of taking longer to complete a job.

In fact, it’s just the opposite, Olson said. She believes the new data and insights that AI can provide will improve strategy and measure performance.

Firms need to evaluate their business operations and find ways where they can improve their high-level offerings. Doing so, Olson believes, will lead teams to hire more strategists, writers and data analysts.

“This is our moment to take the lead,” Olson said.

Casey Weldon is a reporter for PR Daily. Follow him on LinkedIn.