I previously wrote an article about the relationship between agencies and clients. In it, I gave six rules for building better agency/client relationships. It was well received by many in the industry and syndicated to a number of industry blogs; many of you asked for more. One very important subject that goes hand-in-hand with this topic is that of agency fees and services. This is a huge pain point for agencies and clients alike. So in what follows, I am going to cut to the chase and flat out tell you how you should run a fiscally responsible agency and how you, as a client, should view fees and services as part of the Statement of Work for which you hire an agency. These three topline lessons will be simple and to the point.
In general, agencies are under tremendous stress to lower fees and provide value-added services. I know this because a) I own an agency, and b) every industry peer I know speaks of this often. Recently at the iMedia Agency Aspen Summit, many agency leaders – from every major holding company to large independents and newer start-up shops – all grieved at the “well, we have to give away our services and charge less because everyone else is – it’s the reality of competition.” Ladies and gentlemen: this is a cop-out, and you are wrong. If you are competing based on this belief, you are uncertain of your value and differentiation in the marketplace.
LESSON #1 – competing on the above will either fail your business or, at minimum, always have it running on a string. If you are not charging enough and are giving away free services, you are not running a strong, financially sound business.
Ok, so what to do:
Decouple all of your services. Example #1: Media planning/buying does not and should not come with free detailed data analysis, insights and ad-hoc reporting. Example #2: Creative/design work does not come with unlimited tweaks and revisions. Example #3: Paid search campaign management does not come with custom database builds to marry disparate data sets for advanced analytics and data mining.
Manage, measure and analyze all of your time. If you are not truly measuring all of your time and allocating it against a service and client, then you are not being accountable. A $1M fee account may look great on paper, but have you analyzed it the same way you would analyze your client’s campaign or project? If you do this, I am certain you will be surprised at which clients are most profitable and which are least.
LESSON #2 – by lowering fees to the absolute minimum and giving away value-added services, you are actually doing your clients a disservice and securing your place in mediocrity. Don’t say “but” – what I am telling you is a fact, not an open discussion point.
Ok, so what should you do:
Charge a fair price that is strictly contingent on the Statement of Work. If it is the lower of your rate, do not give away value-added services. In fact, I’d strongly recommend you never give value-added services into perpetuity. If you must offer them, give them a term: three months, six months, etc. At that time, it translates into a paid service; if the client sees the value, they will pay. If they don’t, there’s no need to continue providing it.
Let me be clear: I am not saying you should be the highest priced, nor am I saying you should create a bunch of additional services in order to charge a ton of fees. That would be the opposite extreme. Keep it simple, keep it transparent and keep it fair to you in a way that manages client expectations. If you are not being paid fairly for your work, you will end up frustrated, your work will suffer and your client will see this. You know what that means in the long run.
LESSON #3 – clients, take the time to understand the value of your agency partner, and use them for their strength, not necessarily for everything. I know this is contrary to what most agencies would like to hear (most want to be everything to everyone, but that never works well). Additionally, I also know this doesn’t make your job the easiest up front. However, if you focus on the value of the core services provided and pay them fairly for each, a) you should see better results, b) you will create a stronger relationship, and c) your job will be easier. Don’t force the partner to the lowest fee and then also expect many additional services. Remember, you get what you pay for, and that holds true in an agency/client relationship as much as it does in life.
I’m proud of our team at Levelwing; we have built a model that performs very well based on the above lessons, so I speak from experience. As such, we have 94% year-over-year client retention with extremely/very satisfied client satisfaction results; we have 95% year-over-year employee retention; we have arguably grown to one of the largest and most well-respected independent marketing service/agency firms in the country; we are listed among the top 500 fastest-growing private companies in America by Inc. Magazine; we’ve won three performance awards from the AMA and also won an Ernst & Young Entrepreneur of the Year Award – this year alone.
Finally, I want to end with the following: I am extremely passionate about this topic and am always happy to talk about it with anyone interested, so feel free to contact me. I feel the marketing services industry has lost its way quite a bit, and many fail to operate effectively, efficiently and with purpose. I am not an agency guy – never worked at one prior to launching Levelwing. I was always on the client/publisher side of the business. The same holds true of Levelwing’s other Managing Partner, Jeffrey Adelson-Yan. In fact, we don’t employ many former agency folks. We have built a model that is not only different but that works. In my opinion, we have a clean view from our seat – one we thoroughly enjoy every day.