As CMO belts tighten, agencies are turning again to outcome-based pricing

The figures for 2024 and now 2025 show a flat line at 7.7%.

Gartner analyst Ewan McIntyre summed up the findings: “While marketing budgets have stabilized, marketing spending has stalled at a level that falls short for many CMOs.” Many indeed: elsewhere, the survey found 59% of CMOs reporting insufficient budget to carry out their strategies this year. The upshot: many are considering “in-year budget cuts” and most (perhaps all) are getting savvy in attempts to “squeeze more from static budgets,” said McIntyre.

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Second, Deloitte Digital released findings from its Marketing Investment Trends report. 61% of marketing budgets, it found, are determined from percentage of total revenue, percentage change from the previous year or percentage of total company budget. In short, budgets are largely pegged to overall company performance. Against a particularly turbulent macroeconomic backdrop, that’s yet more evidence that hoped-for budget growth isn’t coming soon, heaping yet more pressure on doing more with less.

This stagnation and corresponding drive towards efficiency haven’t been slow in reaching agencies. In fact, helping the CMO through that thicket is emerging as the top demand for any agency, says Thomas Barker, chief executive at creative agency Green House. “A CMO is focused on making sure that they’re hitting long-term brand metrics, but also hitting quarterly earnings and annual goals at the same time. They’re thinking, operationally, about executing in the most efficient way possible to stay on budget and not have their CFO screaming at them. But then also, how can they maintain the strategy that they originally invested so much money in and still hit my sales targets?”

“The sheer amount of complexity that sits in their world is ever-increasing,” agrees Amina Folarin, UK chief executive officer at Oliver. “How do they navigate all that complexity? There are lots of organizations selling them the latest and greatest tools. But understanding how that fits into their existing marketing ecosystems and how their marketing ecosystem needs to evolve is another thing. I think many of them actually can’t even picture what the future can look like, now, because some of the capability of the technology is unknown to us and it’s unknown to them”.

The agency view: Beyond the performance mindset

Helping the CMO to navigate this complexity is an agency’s business in part because supporting the CMO is always an agency’s business – and in part because, for obvious reasons, agencies are keen to ensure that efficiency savings don’t cut their own fees to unsustainable levels.

Just as for CMOs, then, agencies are feeling pressure to prove the value of investment and to achieve more for less. Chris Jones, chief executive of performance marketing agency Space & Time, says that macroeconomic factors have hastened a change in the agency-CMO relationship and how it’s measured. “Going back two or three years, the metrics that a CMO would be measured on were very performance-driven. As long as we could demonstrate that we could hit those bottom-line numbers, irrespective of more strategic goals that we may have pitched in or that might trickle down from the business’s strategic report, the relationships were pretty sound.”

But over the last year or so, Jones says, inflationary pressures combined with a hint of optimism for economic growth led to a hastened shift towards commercialized metrics. “But the one thing that didn’t meet the demand was the budget. Budgets didn’t stretch, but the ambition did.”

“There was a bit of a reset moment a year ago around thinking more strategically and longer-term; getting out of that performance mindset but still with relatively tight restrictions on resources,” Jones says. “The mandate, often, from the top is to squeeze agency fees wherever possible, while wanting to go bigger, go better, more tech-driven, but with limited resources to deliver that change.”

That’s as true in the world of creative agencies as in the performance ecosystem, says Green House’s Barker. “We’re seeing the demand for every dollar invested to generate more value. They want to know how we’re leveraging every dollar, even to engage other media channels that aren’t necessarily in-scope. We have to demonstrate every single output. Yes, procurement is excited by that, but I think it’s the CMOs who are really excited.”

The renewed rise of value-based pricing

Claire Elsworth, strategy director at digital agency Impression, says that the upshot of all of this, for her agency at least, has been to structure around that ROI-based paradigm. “We’ve built our proposition around trying to help CMOs prove quite intensively the value of their marketing investments,” she says. “To not just prove, but ultimately improve the value of their marketing investments over the short and long term”.

For that reason, Elsworth says, in an industry that has long assumed time-based pricing as standard, “the needle is moving to outcome-based pricing.”

We can see this shift across agency disciplines. Laura Perry, head of growth at comms agency Tangerine, says the agency is exploring outcome-based pricing – albeit with a degree of trepidation, given that procurement departments still favour commercial relationships that are more well-established. “If we are truly leading, we should be being paid for our expertise and there’s a value attributed to that. The fee-based model doesn’t work.”

Barker says that Green House is “deliverables-based” on every cent it earns: “The fee is the fee and the cost is the cost, because the deliverable is the deliverable.”

The benefit of that approach in a world with a permanent half-eye on driving down costs: it foregrounds the value of the work, rather than allowing unit prices of hours work to be gradually eroded. “When we’re building our scopes,” Barker says, “we think about not just how much time it takes for the team to generate these concepts, ideas or strategies. We’re actually thinking of the value of the deliverable.”

Jones’s Space & Time likewise has a “flat rule of no time-based pricing,” having made a rethink around commercialising its services “a fundamental part of our strategy.”

“When you’re selling, effectively, a commoditized offering, you’re always trying to find ways you can de-commoditize,” Jones says. “So that it can become less comparable to something else, so that you’re not just being looked at as a cost per hour or a cost per day.” The key, he says, is defining success appropriately for each project and client and pegging commercial arrangements to those metrics: “We’ve got close to 100 clients and the success metric is different with every one of them”.