Latest news with #S4Capital
Forbes
4 days ago
- Business
- Forbes
In The Age Of AI, Why Businesses Are Changing Their Pricing Strategies
The end of the billable hour getty As AI takes on more business processes, more businesses are having to rethink their approach to fee-charging. The reality is that many traditional time-based pricing strategies are becoming obsolete. And it's not hard to see why. When AI can dramatically reduce the time taken to complete a project, how do you justify billing by the hour? Typically associated with law firms, the billable hour has, for decades, been the pricing model of choice for businesses across a range of sectors, including marketing and advertising agencies, consulting firms, IT consultants, architects and accountants. Questions have been raised about the ethics of billing by the hour, but it is the growing presence of AI in so much of the work carried out by firms that is forcing a rethink. Just recently S4 Capital announced it was moving to output-based pricing because of the impact of AI. Changing a pricing model to assign a value or output to services poses significant challenges for many businesses. SCOPEBetter is a pricing platform designed to help them transition from a time-based billing model to one based on outputs and deliverables. Founder and CEO Tracey Shirtcliff says: 'Over the last seven years we have convinced and moved quite a few smart working businesses. Some 'got it', but many didn't, and didn't feel they needed to move. Over the last 12 months, this has changed. All the talk about AI has been about how to use it for efficiency in working, but lately, the realization has come that these gains will decimate the billable hour. We are getting a noticeable increase in enquiries.' Small businesses are seeing AI as an opportunity to level the playing field and leapfrog larger organizations. However, many believe that moving from time-based fees to value-based pricing isn't just about billing. It's about shifting the focus in terms of the concept of value in the AI era. This forces a halt to measuring effort and instead encourages the measurement of impact, at a time when many process-based tasks will become faster and cheaper to complete. The Brick Coach operates an outcomes-based pricing strategy, demonstrating to clients that the business cares more about the results than how long it takes to achieve them. Founder Amale Ghalbouni says: 'It demands tighter scoping, clearer communication, and a deeper understanding of what success looks like for the client. This may be uncomfortable for those looking to make a quick buck, but essential if you want to stay relevant and genuinely care about the work you do for clients.' Measuring impact is key to a successful value-based billing model and Ghalbouni approaches it by spending time upfront in discovery mode with clients to understand their desired outcomes and outputs, what their reality is and what the gap looks like. 'It often gives clients insights into their business they weren't aware of,' she says. 'It also makes the relationship less transactional and ensures we're both committed to achieving the desired impact.' Far from being resistant to change, Ghalbouni's clients have been strongly in favor of it. 'Clients sometimes struggled with hourly or day rates, as it often meant budgets were harder to manage, and outcomes badly defined," she says. "Value-based pricing gives them confidence that they will get the outcomes they need, regardless of how much work or time we put into the project. It took some adjustment to get the margins right first, but after a few projects it became easier to price and predict performance.' Some believe that time-based billing can misalign incentives, rewarding inefficiency over impact. That was why FIG Agency made the shift five years ago to a senior-by-design approach, a structure that allows them to solve problems more quickly and deliver sharper, more effective solutions. Founded 12 years ago the marketing and creative agency consulting firm serving a diverse range of clients, including mid-cap brands such as Benjamin Moore, Tropicana Brands Group and Publix. Partner and CFO Richard Tan says: 'With our proprietary creative data system, StoryData, that harnesses various forms of machine learning and AI to deconstruct the storytelling opportunities, we can evaluate an entire category within 48 hours of a brief. We knew a time-based price wouldn't be appropriate remuneration for those results, so we decided to shift our strategy.' Establishing a new set of billing parameters brings many challenges. Clients need to trust that the results they receive are worth the money they're spending and that the price is fair. Nevertheless, pricing models are evolving, and Tan insists that historic time-based models are becoming less relevant. He adds: 'Outcome-based pricing is the next frontier, and agencies are ready to tackle and embrace it. My advice to other firms is to future-proof their business by focusing on quality outputs and results rather than time.' Others are not quite ready to consign billable hours to history and believe they still have a place in business. Continuous Improvement Projects has a blended model that allows them to use either value-based pricing or time-based pricing based on a logical pricing strategy. CEO Kiran Kachela says: 'Value-based pricing is our preferred model for projects with clearly defined objectives and measurable deliverables, empowering clients with transparent cost-benefit analysis and a clear understanding of their potential return on investment upfront. It shifts behaviors, aligning everyone toward a solution-focused, output-driven outcome where the tangible value we deliver is clear for all to see.' But she is adamant that the day-rate model still has its place, not least because of the many unknowns and variables, evolving scopes, and high risks that can be baked into a project. 'When things are too risky or ambiguous, value-based pricing simply doesn't work as it necessitates excessive risk premiums, undermining its core benefit,' says Kachela. 'Ultimately, it's about finding that sweet spot; a blended approach that weighs up output-focused solutions with the inherent risks. We choose the model that's going to deliver maximum ROI for our clients.' According to Shirtcliff, the argument that billing by value is better than billing by the hour, for both the business and the customer, is a compelling one. 'Professional services businesses that productize what they do and charge for outputs or outcomes find it more attractive overall,' she says. 'You can increase revenue without increasing proportionally the staff need, breaking the traditional hourly billing linear model.' There are also opportunities to reduce operating expenses, and the administrative burden of tracking, reconciling and defending billable hours, which can consume 20% of business operating expenses, and which productization can help eliminate. 'In a time-based model, high-value talent is often a cost center,' she adds. 'In a productized model the impact can be scaled across multiple solutions, generating higher returns and not labor costs.' As AI continues to evolve and play a bigger role in work practices, and pricing strategies, will the setting of service pricing parameters become even more challenging? Shirtcliff believes that teams will develop to have a series of AI-powered products, or outputs that will be chosen and presented to clients based on the scenarios that the clients need to solve for. She adds: 'I also believe that over time we will see AI Agents asking those scenarios or questions of teams which will produce the products that the business will deliver best and in which circumstances.'
Daily Mail
6 days ago
- Business
- Daily Mail
Sir Martin Sorrell's ad agency hit by big tech marketing cutbacks
S4 Capital cut its annual turnover guidance on Wednesday as technology companies remained cautious amidst heightened uncertainty. Sir Martin Sorrell's advertising agency expects its like-for-like net revenues to decline by a low single-digit percentage figure in 2025, having previously anticipated them to be roughly similar to last year's levels. Sorrell said tech clients, which account for around half of S4's turnover, are prioritising spending on expanding their artificial intelligence capacity. A lower spend from one large customer is likely to mean comparable sales from the firm's tech services segment will be 'down more significantly', Sorrell added. By comparison, the former WPP boss forecasts like-for-like sales in S4's marketing services arm to be 'only slightly down'. Sorrell noted that trading in the opening five months of 2025 reflected the 'volatile global macroeconomic conditions' resulting from Trump's tariffs, US-China relations, the Ukraine war and Middle East tensions. He told investors: 'Once the levels of tariffs are negotiated and the impacts assessed, we believe clients will become much more selective about the geographies in which they operate in order to find growth and focus on implementing technologies, such as, but not only AI.' Despite this backdrop, S4 Capital continues to expect its operational earnings before nasties will be broadly close to 2024 levels. It additionally forecasts an improved performance over the second half of the year due to the timing of revenue from major new business wins, such as Amazon, General Motors, and T-Mobile. Among other contract wins this year are Samsung, Buscopan developer Opella, and Jack Dorsey's payments platform, Square. S4 Capital shares were 4.85 per cent higher at 27p on Wednesday morning, although they have still shrunk by more than 97 per cent from their peak four years ago. Sorrell founded S4 in 2018 after spending over three decades growing WPP into the world's biggest advertising business. The London-based company encountered significant difficulties in 2022 after delaying the publication of its annual results twice because of accounting issues. A Sunday Times investigation found S4's breakneck expansion had left the firm's finance team struggling to cope, with employees not accurately recording sales and MediaMonks, a subsidiary, failing to pay influencers and creditors on time. Following the scandal, S4 made redundancies, instituted stronger financial controls, and halted its aggressive strategy to grow through acquisitions. In the last financial year, the group's reported net revenue decreased by 13.6 per cent to £754.6million. And its losses skyrocketed from £14.3million in 2023 to £306.9million as poor trading conditions in the second half and the medium-term outlook following the completion of its budget led to S4 Capital declaring massive impairment charges.
The Independent
6 days ago
- Business
- The Independent
S4 Capital downgrades sales outlook as tariff woes hamper economic outlook
Sir Martin Sorrell's marketing firm S4 Capital has warned that annual revenues are set to fall amid customer caution as US tariff hikes cause global economic uncertainty. The group said like-for-like net revenues are expected to drop by low single percentage digits over the full year. It had previously guided for revenues to remain largely flat on the year before. The group flagged 'wider market uncertainty and significant volatility in global economic policy, particularly as a result of the US-imposed tariffs'. But S4 Capital said it still expects underlying earnings to be 'broadly' similar to 2024, helping shares lift 6% in morning trading on Wednesday. Sir Martin, executive chairman of S4 Capital and previous boss of marketing giant WPP, said: 'The global macroeconomic environment has become even more challenging in 2025. 'Assessing the impact of US-imposed tariffs has been added to the three key risks around US/ China relations, Russia / Ukraine and Iran /Middle-East. 'Clients, therefore, are likely to remain cautious.' He said the group would 'continue to focus on our cost base and will take further action to support profitability, if necessary'. 'We expect an improved performance in the second half of the year and a greater second half weighting than in the prior year, enhanced by the phasing of new business revenue, including wins already secured,' he added. The firm last month reported an 11.4% plunge in pro forma net revenues in the three months to March 31 and warned over ongoing cutbacks in tech spend. S4 Capital has cut its workforce by 8% to around 7,000, down from about 7,600 a year ago, as it looks to rein in costs in the face of more challenging trading.
Yahoo
6 days ago
- Business
- Yahoo
S4 Capital downgrades sales outlook as tariff woes hamper economic outlook
Sir Martin Sorrell's marketing firm S4 Capital has warned that annual revenues are set to fall amid customer caution as US tariff hikes cause global economic uncertainty. The group said like-for-like net revenues are expected to drop by low single percentage digits over the full year. It had previously guided for revenues to remain largely flat on the year before. The group flagged 'wider market uncertainty and significant volatility in global economic policy, particularly as a result of the US-imposed tariffs'. But S4 Capital said it still expects underlying earnings to be 'broadly' similar to 2024, helping shares lift 6% in morning trading on Wednesday. Sir Martin, executive chairman of S4 Capital and previous boss of marketing giant WPP, said: 'The global macroeconomic environment has become even more challenging in 2025. 'Assessing the impact of US-imposed tariffs has been added to the three key risks around US/China relations, Russia/Ukraine and Iran/Middle-East. 'Clients, therefore, are likely to remain cautious.' He said the group would 'continue to focus on our cost base and will take further action to support profitability, if necessary'. 'We expect an improved performance in the second half of the year and a greater second half weighting than in the prior year, enhanced by the phasing of new business revenue, including wins already secured,' he added. The firm last month reported an 11.4% plunge in pro forma net revenues in the three months to March 31 and warned over ongoing cutbacks in tech spend. S4 Capital has cut its workforce by 8% to around 7,000, down from about 7,600 a year ago, as it looks to rein in costs in the face of more challenging trading. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Reuters
6 days ago
- Business
- Reuters
Sorrell's S4 Capital cuts annual revenue forecast as tech clients stay cautious
June 4 (Reuters) - Martin Sorrell's ad group S4 Capital (SFOR.L), opens new tab said on Wednesday it expects annual like-for-like net revenue to decline by low single digits, as tech clients remain cautious amid a weaker global economy and U.S. tariffs. The company had previously expected 2025 revenue and operational core earnings to be broadly similar to 2024. S4, which generates nearly half of its business from the technology sector, said tech clients continued to favour capital spending over marketing, while the unit continued to see a hit by reduced work from a major client. The owner of the Monks ad agency maintained its full-year like-for-like core operating profit forecast. Once there is more certainty regarding U.S. tariffs, S4 said it expects clients will become more selective about where they operate and will focus on technologies such as artificial intelligence to drive performance in a slower growth environment.
