TL;DR

• Welcome to the new-look newsletter!
• We're launching a new Digital Agency Growth Guide. Delphi members will get it early. Join Delphi so you get the guide as soon as it drops.
• Value-Based Pricing was supposed to save us, but usage fell from 31% of agencies in 2024 to 18% in 2025
• Agencies still using it grew more slowly than every other pricing model in the survey
• AI exposed how much of the "value" was actually still execution, and clients caught on
• Most agencies pitching VBP can't independently measure the outcome they're claiming
• Raising rates inside your existing model and expanding existing engagements are producing better results than chasing a pricing-model migration
• Want a full review of your agency's revenue generation strategy, system, and tactics? Explore our Growth Review service and see if it's a fit for unblocking your agency's growth.​
• We revised the 2026 Digital Agency Industry Report - same great research, just laid out in a way that makes it easier to reference and digest.

New Look Newsletter

Welcome to the new Promethean Perspective. The newsletter has a fresh look this issue, drawn from the design system we built for the 2026 Digital Agency Industry Report. Feel free to reply with feedback. We read everything!

Join Delphi, get the Digital Agency Growth Guide

Coming soon: Delphi members will get a first look at our upcoming Digital Agency Growth Guide. It's a compilation of 10+ years of agency research that delves into the systems and strategies that drive reliable growth for digital agencies.

​Make sure you're signed up for Delphi, so you get the guide as soon as it drops later this week.

Value-Based Pricing Was Supposed to Save Us

I mentioned this briefly in the Pricing Models Follow Agency Archetypes piece a few weeks back. The data on it is strong enough that it deserves its own writeup.

Our 2026 State of Digital Services Report showed that value-based pricing usage fell from 31% of agencies in 2024 to 18% in 2025. The agencies still using it grew more slowly than those using any other pricing model.

The dominant T&M + fixed bid + retainer mix beat them.

Project-based pricing beat them.

Retainers beat them.

This read comes from a single survey wave, so I'm not claiming it's the final word on the topic, but the size of the drop and the underperformance together send a clear message: agencies that switched to VBP in recent years are not achieving the results they thought they would, and now they're switching away from it.

But VBP is the model that every consultant (us included), podcast, and conference panel has been pushing as the answer to AI commoditizing hourly work.

The case for it is pretty simple: if AI compresses execution time, hourly billing punishes you for being efficient, and value-based pricing decouples your fee from the hours you spent.

The problem, and why it looks like everyone was wrong about VBP, is that it takes a significant amount of deliberate positioning work to pull off correctly.

VBP prerequisites

The case for VBP isn't new. David C. Baker, Ron Baker, Tim Williams, and Blair Enns have been writing about it for two decades. The prerequisites they've published fall into two groups, and most agencies that tried VBP in the last few years cleared maybe one or two of them.

These firm-level prerequisites have to be true before any specific engagement is even on the table:

• Leadership is committed to the model.
• Production utilization is above ~60%.
• You know your cost floor.
• You have IP or specialized expertise that meaningfully backs the value claim, since generic services can't be priced on value.
• Your internal language and incentives have moved off of timesheets.

Then there are engagement-level prerequisites that apply to each specific pitch:

• A real value conversation happens before pricing comes up.
• The client agrees on a measurable outcome in financial or operational terms before kickoff.
• Your contribution to that outcome is credibly attributable to your work.
• The stakes are high enough to justify the fee. Maintenance work and discretionary spend rarely qualify.

If you can't clear most of these, our data is consistent with what other experts have been saying all along. Standard pricing will outperform VBP for your firm.

Market forces impacting VBP

AI has compressed the execution layer faster than agencies have built the strategy layer above it.

We wrote about this in this year's SoDS report:

The pricing power that VBP relies on is also under pressure across the industry. VBP's economics assume the agency has real pricing power. The client has to see you as one of a small number of options capable of doing the work, which makes paying a premium feel like rational risk reduction rather than an indulgence. When that pricing power weakens, the math and the argument fall apart.

Service specialists' average hourly rates fell within the same rate band as service generalists'. The overall specialist median is actually a rate band higher than the generalist median. So, specialists are not getting outpriced on rate.

Project margins are where the specialist advantage still works. Service specialists earned an average project margin of 37% in 2025. Service generalists earned 27%. At the project level, specialists are 10 points more profitable than generalists, which is exactly what theory predicts.

Net margins are where it falls apart. Service specialists earned an average after-tax net margin of 12% in 2025. Service generalists earned 16%. That's the first time in our dataset that generalists out-earned specialists at the firm level, and it shows up despite specialists keeping their rate parity and project-level lead.

The inversion happens in the space between the project margin and the net margin. That space is overhead, non-billable time, revgen cost, and the operational structure required to maintain a specialist position. Whatever specialists used to capture in operational efficiency or repeatability is now being absorbed before it reaches the bottom line. AI can explain part of it, while the plateau in specialization explains another part, since "specialist" stopped creating scarcity once everyone claimed a niche.

For VBP, this is the harder problem to solve, since the model requires specialists to translate their pricing position into firm-level economics. The data says they are failing to convert, and they are failing in a place that a pricing-model migration cannot fix.

What's moving the needle

Our stance is that VBP still works, as long as it's implemented with care, but it's not the right model for a large portion of the industry. Investing your team's time and resources elsewhere often yields better results. These three tactics are doing more to drive agency revenue right now than a change in pricing model. Each one is something faster-growing agencies are doing, regardless of where they land on VBP.

1. Raise rates inside the model you already have.

About 22% of agencies raised rates in 2025 and grew faster than the 73% who held steady, regardless of pricing model. Across the board, rate movement is doing more for agency margins than model selection. This is the lowest-friction margin lever available to most agencies, and almost nobody is using it aggressively enough. Top-of-funnel lead flow directly impacts a team's ability to experiment with pricing. Get that right first, and you'll have a lot more leeway.

2. Grow engagement size inside existing accounts.

Agencies that expanded average engagement size in 2025 grew 13% on average and earned 37% project margins. Those that didn't change engagement size grew 2% and earned 34%. Bigger work inside accounts you already serve is producing better results than chasing new logos or pricing-model gymnastics.

3. Package what you deliver.

Productize a recurring engagement type by defining the offer and fixing the price. It's fixed-bid in disguise, but it eliminates scoping negotiations and bakes margin into the offer. AI has made it significantly easier to systematize the internal knowledge and processes productization requires. Or reframe retainers around outcomes rather than hours. Keep the fixed monthly fee, but write the deliverable language in outcome terms. You capture most of VBP's positioning benefit without the measurement or proof headaches of a full VBP implementation.

The T&M + fixed bid + retainer combination remains the dominant mix and grew faster than VBP-only in 2025. There's a lot less energy required to roll with pricing that's already common in the marketplace. That frees up the team to dial in everything else around pricing, and makes it easier to grow a shop when the VBP prerequisites aren't met.

The simplest version of the story is that the faster-growing agencies are doing more valuable work for their existing clients at rates that reflect that value, regardless of the pricing model employed. For now, at least, it's less about VBP vs. T&M and more about how the value that's created is framed to the client. Many principles found in VBP can be applied to other models, and they'll help as long as their prerequisites are met.

I hope this helps make it easier to build an agency that grows as quickly as you'd like.

Until next time,

Revised Industry Report

The report redesign that inspired the newsletter redesign. It's the same great research, just laid out in a way that makes it easier to reference and digest.