10 Ways For Marketers To Avoid Agency Sticker Shock

This post is by Stephan Argent, CEO of Argedia Group and a member of the Marketing FIRST Forum, the global consulting collective co-founded by TrinityP3

If you’ve ever been faced with sticker shock or seemingly pricey invoices from your agency, then this post is for you.  And even if you’ve not come face-to-face with these issues, this post could help you avoid it.

Your marketing budget is precious. Likely every dollar has had to be justified and hard-won after months of number crunching and negotiation.  So to be faced with agency invoice sticker shock isn’t something anyone needs to contend with.

Agency sticker shock

Whether you’re planning budgets, dealing with overages, worried about budget allocation or perhaps undertaking or have just completed an agency review, there are some simple steps you can take to guard against sticker shock, find incremental dollars, re-jig your budget allocation, or spend precious time negotiating the bill with your agency.

Here are ten ideas that may help prevent unwelcome surprises and give you some comfort as you manage your marketing budgets:

1. Define a scope of work

Perhaps the most important aspect of budget planning and allocation is to define an annual scope of work and have your agency(s) provide a plan and cost to deliver it.  Without it, it’s virtually impossible to allocate your budget in a meaningful way and managing it will prove extremely challenging.

2. Define out of scope project fees

Having defined your scopes of work for each agency, make sure you understand how out of scope project fees will be calculated, monitored, managed and capped. Set out clear guidelines as to how these fees will be estimated and approved.

3. Look beyond the rate-card

Even if you’re working to a blended hourly rate or are comfortable with the rates you’ve negotiated, a rate-card is only a menu – it doesn’t define the parameters for which items are ordered.

4. Understand agency multiples

Everyone deserves to make a fair profit on what they do, but it’s important when engaging an agency or committing to a scope of work that you understand what that margin looks like and how it’s calculated. If you’re not sure how to convert the overhead and profit mark up to a multiple, you can convert profit mark up to profit margin and back again using our calculators on our web site.

5. Get to know our calculators

Whether you want insight into agency salaries, hourly rates, number of billable hours in a year, or overhead and profit multiples, we have some easy to use calculators that’ll give you transparency and a better handle on how agency costs are proposed.

6. Benchmark costs

Marketers often say to me “we’re paying too much for our agency services…” to which I usually ask, “how much should you be paying?”  If the answer is “we don’t know”, then it’s time to find out. We can benchmark costs across all aspects of your marketing budget to provide you with reliable data that will help determine whether you are or aren’t paying too much and specifically where in your budget there may be room for improvement.

7. Know what the extras cost

Particularly in areas where your requirements are production heavy, it’s essential to know what extras cost.  While they may seem innocuous on paper, these costs can really add up over time.  Look at the detail in print and broadcast studio costs, digital outsourcing and other extras to ensure those rates are competitive and don’t compound potential sticker shock issues.

8. Define success metrics

To help avoid sticker shock, be clear about your definitions of success for the agency and ensure that budget and cost management form part of any bonus structure you might be contemplating.

9. Don’t let procurement go it alone

While procurement can provide valuable insight into contract negotiation, they don’t have the intimate knowledge of marketing and strategic requirements that you and your teams do. So if procurement forms part of your negotiation strategy or requirement, take time to ensure they fully understand the nuances of your requirements.

10. Ask a specialist for input

In addition to agency search, we specialize in benchmarkingagency evaluationcontract negotiation and resolving cost friction between marketers and their agencies, with proven methodologies and proprietary tools to help shift often emotional discussions into the rational.

Managing your budget and avoiding sticker shock shouldn’t be something to worry about – it should form a safety-net around your budget that takes the uncertainty out of agency financial management.  In the end, avoiding sticker shock is easy if you take the time to prevent against it.

How does your organization proactively plan to avoid and manage potential sticker shock from your agency?

photo credit: kenteegardin via photopin cc

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About Stephan Argent

Stephan Argent is a former agency planner from England, and has held senior roles in agencies in both Canada and the United States. Most recently he was Vice President of Digital Media at CTV, and is now President of The Argedia Group, helping clients find “agencies for the digital age.” Visit Argedia here
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