Agency Pricing RealitiesAuthor: Scott Sterner | 3 Comments
Walk around the halls of any ad agency and you will hear a wide array of colorful language more suited for a locker room than a place of business, but the dirtiest word you are likely to encounter is the dreaded “procurement”. This word universally sends shivers down the spine of anyone that’s had the pleasure of negotiating scopes of work and more precisely, the agency fee associated with said document.
I do not claim to offer a surefire cure for the pain of scoping negotiations, however the best remedy to steer clear of “procurement hell” lies in the art of the scope. And while I can wax on poetically about the importance of defining and outlining objectives, tactics, goals, deliverables, timelines, blah, blah, blah, let’s cut to the case – agency fee model is the biggest hurdle we encounter. The question we must answer is what is the best pricing model for agencies and clients alike – a retainer approach or an hourly bill model.
Now I’ll be the first to admit that an endorsement for a retainer approach sounds a bit biased coming from the agency side. But when compared to a billing by the hour model, that tends to be the option of choice from your friendly neighborhood procurement person, the retainer approach offers benefits that stretch well beyond cost alone.
Why you ask? Let’s say you have a household project that does not fit into your expertise as a proud, do-it-yourself homeowner. And let’s also assume you don’t have the time and/or equipment to accomplish this project. What gives you more comfort in dealing with a general contractor – a flat cost based on competitive marketplace considerations or the unknowns of paying an hourly rate with variables such as undefined timelines, non-guaranteed staffing (workers) and the inevitability of cost overruns.
Flashback to the agency world – the reality is staffing is lean even the best of times. Agencies do not hire ahead of the curve and we are not built to have employees sitting on the sidelines waiting for their next assignment. A retainer approach secures resources by locking in a team and reducing variables such as waiting on team members assigned to multiple projects (i.e. extended timelines and billable hours) as well as the removal of any incentive on the agency side for efficiency of timing. The best agency/client relationships are based on continuity – we are service organizations at the heart and if it’s my money, I want the best talent with the least amount of risk for turnover. The promise from the agency side is that a retained team will provide dedicated resources and that promise must be kept for this approach to work.
So while procurement may never be an enjoyable process, the pain can be minimized when we are able to provide competitively priced dedicated teams that are set up for success. And isn’t that what both agency and client ultimately want to achieve?