Pricing Strategies That Work: How Agencies Are Balancing Growth & Stability

We found some really interesting bits of information in the Function Point 2025 Industry Report. We surveyed over 240 creative agencies to gather this data for you. And one of the things we really dove into was pricing—the linchpin of profitability, client retention, and long-term growth. However, we found that 58% of agency owners in 2025 reported that growing and maintaining revenue is their top daily challenge.

That stat isn’t just telling—it’s shouting. And it’s loud. It speaks to the difficulty of striking the right balance between pricing competitively and sustainably, especially in a world where in-house teams, AI-powered tools, and freelancer marketplaces are always a few clicks away.

In this article, we’re going to dive deep into how creative agencies are navigating that challenge. We’ll review the different types of pricing models gaining traction, the real impact of price adjustments on profit, how to talk money with clients, and how smart financial tools (like Function Point) are helping agencies track, test, and refine pricing strategies with precision.

Let’s break it down.

58% of Agencies Mention Revenue Growth as Their Top Challenge—Why?

Despite growth in demand for creative services, agencies are finding it harder to translate that demand into consistent, profitable revenue. According to the 2025 Industry Report:

• 58% of agency owners said revenue growth is the top challenge in managing their agency on a daily basis.
  
• Only 38% of agencies reported a revenue increase from the previous year.
  
• A combined 62% of agencies either experienced flat (27%) or declining (35%) revenue in the same period.
  

HOW DID YOUR AGENCY’S REVENUE CHANGE?*

*38% of total agencies polled answered this. 

So what’s going wrong?

The Usual Suspects:

• Underpricing: Many agencies (especially smaller ones) undervalue their work to stay competitive. This winds up leading to thin margins that don’t support their team’s growth or overhead.
  
• Over-servicing: A staggering 79% of agencies are over-servicing clients without charging for the extra work. This is all too often to “keep the client happy.” But this always happens at the expense of their own profitability.
• Scope creep: Without clear, enforceable scopes of work, those well-priced projects become unprofitable fast.
  
• Pricing inertia: Some creative agencies often stick with outdated pricing models even when costs rise, demand shifts or their services evolve.
  

Does this sound a little too familiar? Are we hitting a little too close to home? We thought so. 

Now, it doesn’t stop there. The pressure is compounded by client churn. 65% of agencies said they are losing clients to in-house teams—a trend driven by cost-cutting and the (often incorrect) assumption that in-house solutions are more efficient. 

*44% of total agencies answered

Together, these issues create a pretty dangerous cycle. Agencies work more, earn less, and struggle to scale without burning out.

Pricing Model Trends: What’s Changing?

In order to stay competitive, creative agencies are experimenting with new pricing models, or even fine-tuning old ones. This helps them to better match how they deliver value. Here’s how the 2025 agency landscape is shaking out:

WHAT TYPE OF PRICING MODEL DOES YOUR AGENCY HAVE?

Time & Materials (32%)

This pricing model is still widely used, but is on the decline. Many agencies are stepping away from hourly billing due to client resistance and the unpredictability of project scopes. But this model can oftentimes lead to underbilling when it’s paired with poor time tracking.

Fixed Fee (25%)

This pricing model is popular for clearly scoped, repeatable projects. Like websites, branding kits, or even audits. What’s great about this is that clients like the predictability, but creative agencies do need to make sure that scopes are airtight so they’re not losing margin to scope creep, which can be a real big issue. 

Retainers (27%)

Stable, recurring revenue? Yes, please. This pricing model is absolutely great for long-term relationships and steady income. But it does require strong boundaries in order to avoid the dreaded “all-you-can-eat” model.

Value-Based (16%)

Although once trending up, value-based pricing saw a bit of a dip in 2025. It’s a powerful pricing model. With value–based pricing, agencies charge based on results, not hours. But this can be really tricky to implement without deep trust, clear ROI measurement, and well-structured agreements.

So What’s Driving These Changes?

A few things that are spurring this shift in model structure are: 

• Clients are demanding greater clarity and flexibility.
  
• Agencies want predictable income and higher margins.
  
• The rise of AI and automation is shifting perceptions around value and effort.

The Impact of Pricing Adjustments on Profitability

Let’s talk results. Which strategies actually moved the needle?

Well, this tells us quite a bit, doesn’t it? 

• Price increases only helped 20% of agencies in 2024, down from 61% the previous year. Why? Because many agencies raise prices without clarifying the added value, causing client pushback.
  
• Upselling saw a similar slide—from 67% success to just 22%. Agencies can’t just tack on services anymore; they must tie them to outcomes.
  
• New client acquisition used to be the go-to, but that’s halved in effectiveness. The landscape is more competitive, and cold leads are harder to close without clear differentiation.
  

What’s the Lesson Here?

Price adjustments only lead to growth when paired with:

• Clear value communication: If clients don’t understand why they’re paying more, they’ll push back. But if you connect pricing to outcomes like increased ROI, improved efficiency, or strategic insight, they’re more likely to say yes.
  
• Proper scoping: A great price means nothing if your scope is vague. Without well-defined deliverables, you’ll end up doing more for less, even with a higher sticker price.
  
• Client education: Teach your clients how your work contributes to their goals. When clients see you as their strategic partner and not just a service provider, they’re more open to evolving pricing models.
  
• Confidence in your positioning: If you’re hesitant when discussing your value, clients will feel it. Pricing is as much about mindset as math. The agencies that succeed are the ones that lead these conversations with confidence, clarity, and data to back it up.
  

Ultimately, adjusting your pricing isn’t going to include only charging more. You’ve got to build trust and show your clients exactly what they’re paying for.

How to Communicate Pricing Changes to Clients

Now that we’ve looked at changes in 2025 and a few strategic pricing models, are you considering raising your rates or shifting your pricing model? Or already planning to do so? Great. Now comes the part everyone dreads: talking about it.

Here’s how to approach pricing conversations so you keep the client and grow the relationship:

Lead with Value

Deep down, your clients don’t actually care that your software costs went up or that inflation is hitting your coffee budget. They care about what they get. Focus on:

• Results you’ve delivered.
  
• Industry knowledge you bring.
  
• Strategic support you offer.

Don’t make the pricing adjustments about you, the agency. Make it about how the work you do directly supports their own business goals. Anchor the conversation in outcomes, and you’ll be able to justify the price with them.

Time It Right

Don’t surprise clients mid-project. Time pricing changes to coincide with:

• Contract renewals.
  
• The completion of a successful project.
  
• A new service offering.

If you can frame your pricing with these positions, then the change will feel like a natural step in your evolving partnership. It won’t feel sudden or out of the blue for your clients.

Explain What’s New

If your pricing is changing, what are they getting that’s different or better?

• New strategy sessions?
  
• Additional reporting?
  
• Faster turnaround times? 

Even if the change is subtle, frame it. Show them the added value that they’ll experience moving forward. Don’t make them guess.

Offer Options

Use tiered pricing to give clients a sense of control. Some examples include: 

• Base Package: Essentials
  
• Standard: Essentials + add-ons
  
• Premium: High-touch support
  

Let them choose based on budget and goals. Clients really love clarity and autonomy. And tiered pricing gives them both of these! 

Be Transparent, Not Defensive

You don’t need to justify every penny. But you do need to be clear, confident, and respectful. Most clients won’t mind paying more if they feel like they’re getting more. So make sure to communicate that. 

Leveraging Financial Tools to Track and Manage Revenue (Function Point Software Capabilities)

The best pricing strategy can absolutely fall apart without good data. That’s where tools like Function Point come in. These tools can give creative agencies the visibility and control they need to measure profitability, track performance, and optimize pricing over time.

Here’s how Function Point can help you: 

Track Time and Resource Allocation

Still pricing projects by gut feeling? That’s not efficient. Function Point lets you track time by task, client, and employee. Which means you can have a real picture of where time is being spent and where scope creep is cutting into margins. 

Some of the benefits of this include:

• Identifying underperforming service areas.
  
• Improving scope accuracy for future projects.
  
• Making smarter hiring or outsourcing decisions.
  

Monitor Profitability by Project and Client

Not all clients are created equal. Some are dreamboats, while others are straight up black holes.

With Function Point’s financial dashboards, you can:

• See gross margin per project or client
  
• Flag underpriced retainers or loss-leader services
  
• Forecast future profitability with confidence
  

Estimate and Scope with Confidence

Pricing issues usually start at the estimating and proposing stages. Function Point allows you to build repeatable, standardized estimates. And build them based on past performance. Which means you can stop pulling numbers from the creative ether. Or your gut…

Visualize Your Revenue Streams

Function point even lets you break down your income by:

• Project type
  
• Client type
  
• Pricing model 

Seeing this data helps you identify what’s truly working and what’s barely keeping the lights on.

Streamline Invoicing and Payments

Late payments mess with cash flow, plain and simple. Function Point integrates that time tracking we mentioned above with project milestones right into your invoicing. Which means your clients get billed faster and more accurately. And you get paid on time. Nice! 

The Price Is Right. If You Set It That Way

Pricing is your strategic secret weapon for revenue growth. But you will need to adjust it as your agency evolves. The best agencies in 2025 are those who understand which pricing models support their business structure, communicate their value clearly and confidently to their clients, and use tools like Function Point to make and support smarter decisions.

So if your agency is struggling with revenue growth, don’t start by selling more or working longer hours. Start by asking: “Is our pricing helping us grow—or holding us back?”

Use Function Point’s built-in pricing and profitability tools to track, test, and tweak your pricing with real data. Whether you’re shifting from hourly to retainer or launching your first value-based offer, FP helps you turn pricing into a growth strategy—not a guessing game.

Book a demo with us and take the guesswork out of revenue growth!