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Lou Lasday: Meet your new ad deptartment
Create the "insider" track with the right compensation plan.
"Few things are more important to making an ad agency-client relationship work well than getting the compensation agreement right", says Bob Lamons, author of The Case For B2B Branding, writing in Marketing News Magazine of the American Marketing Association.
Admittedly, if both parties feel the amount of money paid is fair in regard to the amount of work performed, then it allows your Gulf Coast enterprise to launch a critically important strategic initiative. First, you establish recognition; a professional marketing communications relationship exists. Second, trust; a straight count is given and a long-term relationship is built. Third, motivation; as a marketing partner, "we're" on your in-house staff.
On the other hand, if one party feels that too much or too little money is changing hands, then too much time is spent in believing the arrangement is created on a hit-or-miss, random, unfulfilled basis.
In my own advertising agency, which started in my two bedroom apartment and ended up with 160 employees in four cities, we always invoiced in one of three ways. See if there is an idea here that works for you.
To bill or not to bill
The most frequently utilized arrangement is the hourly time charge concept. Every employee was assigned a fixed rate. We recorded our time each day and daily submitted the time sheets with hourly or fractional hours with a description of work effort. At the end of the month, we totaled the billable hours by project and issued an invoice.
There were checks and balances, of course. Aside from media invoices which usually carried a standard 15% agency commission, production estimates were always issued. Cost excess was usually written off if caused by us and the client always benefited from cost efficiency savings. Most design firms or art studios work in a similar manner.
The second most common billing concept is a project billing model. It may or may not be based on hourly rates. The difference is you lump sums for the total estimated manpower, giving one estimated bulk charge and hope the job goes according to plan. Client major changes after initial drafts are additional.
Frankly, neither of these approaches is ideal. That's because your communicator must always be selling each project to you and convince you to move forward.
Win-win billing
There is a third and better arrangement for you and for them. It's the "us" concept. Without striking fear into your heart, here is the ideal relationship-building concept that will have your creative advisor be proactive on your account rather than reactive when you call. Are you ready? The third compensation method which rates number one with me is the retainer method.
Retainers put the outside agency on the in-house team. Instead of having to sell something, the communicator is allowed the consultive role to determine how best to spend the budgeted funds.
It is not a question of "should we involve the agency on this?" You are remiss if you don't involve them because you are already paying a monthly retainer fee for their advice and service.
The concept for compensation, of course, is to keep the workload consistent with the retainer. It's like having an in-house agency. If you already have one and its work is satisfactory, this allows fresh thinking that has no fringes, no sick calls, vacations, paid leaves and more. This could certainly stretch your enterprise's marketing communications performance. You might consider a minimal but totally realistic retainer just enough to establish a continued relationship.
Say what?
Possible verbiage for a Letter of Understanding for your Gulf Coast enterprise should be high on flexibility, low on legal-eze and might suggest:
"...the services provided by the Agency will be on a best effort basis to include but not be limited to meeting time and strategic planning with client, budget allocations, copy writing, first draft issue art layouts, secondary research, sales promotion programs and public relations initiatives. Your service team will include Mary Smith as the week-to-week account supervisor with a team of professional communicators who will include 'A, B, C and D'.
"In order to maximize efficiencies of time, we estimate that approximately "X" hours of time per month will be devoted by the team in accomplishing the above program. Finished art work would be additional and estimated for approval in advance of invoicing. Items purchased on your behalf such as media, photography, video, talent, printing, mailings, display and agency travel will be estimated to you as an additional net cost. This arrangement will be for a six-month period commencing Jan. 1, 2007 and should be reviewed prior to July 1, 2007. At any time during the period and beyond, this arrangement may be modified or cancelled by either party on 30 days written notice. The monthly retainer will be "X" and supported by activity sheets".
The right compensation agreement can break down barriers between agency and clients! Your responsibility for their initial talent search is key. Once you have a comfort level with the newly proposed team, this arrangement will promote a successful learning curve, trust, best effort and assure the agency a minimum commitment in knowing what income will be available to cover their costs.
Most important, you'll get better service because this removes the vendor mentality and "we/they" attitudes. Suddenly, it's all about "us" and how "we" are going to solve the problem at hand. That's togetherness and that's nice!
Lou Lasday, an independent marketing advisor residing on Longboat Key, creates action-oriented Strategic Marketing Initiatives for Gulf Coast emerging companies. A career Direct Response Executive, he has been a general partner of a major national marketing communications firm and Regional President of the American Marketing Association. He can be reached at [email protected]
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