The billable hour, that ancient instrument of agency economics, appears to be losing its grip on Madison Avenue — or at least on a quarter of it.
According to a study released Friday by Forrester Consulting, conducted in partnership with Dentsu, 25 percent of North American agencies have now shifted exclusively to fixed-fee pricing arrangements with their clients. The move away from hourly billing, long discussed as inevitable but rarely executed with conviction, seems to have accelerated under pressure from artificial intelligence, which has a way of making the question "how long did that take?" rather beside the point.
Among those agencies that have made the switch, satisfaction appears reasonably high: 63 percent reported being either satisfied or extremely satisfied with the fixed-fee approach, according to the study. (Whether their clients share this contentment was not specified.)
Perhaps more telling is the appetite among those who have not yet converted. More than half of marketers still operating under traditional pricing models said they were interested or extremely interested in adopting fixed fees, with an additional 28 percent describing themselves as somewhat interested — a phrase Forrester interpreted, generously, as signaling "broad openness" to change.
The shift represents something of a philosophical reordering for an industry that has spent decades defending the relationship between time spent and value delivered. Fixed-fee arrangements, by contrast, suggest that what matters is the work itself, not the hours logged producing it — a notion that copywriters have been muttering into their coffee for years.
Whether the remaining 75 percent of agencies will follow remains, as these things always do, a matter of competitive pressure and client patience. The billable hour has survived previous threats to its existence. Then again, so did the fax machine, for a while.
Original story published in adweek.com: "One Quarter of North American Agencies Have Shifted to Fixed-Free Pricing"