How to calculate the real value of your advertising agency retainer

The real value of your agency retainer is in the mix of resources, not just the level or resources.

What do I mean by this?

We asked 3 agencies to submit a proposal during a pitch for a clients business. They were provided a detailed scope of work with clear indication on the level and types of outputs required by agency during the first 12 months of the contract.

All the agencies came back with proposals that varied in the number of resources but all were within $125,000 or within 3% variance.

Agency A: 24.7 FTE @ a cost of $4,302,000 Average cost per FTE: $174,153

Agency B: 32.4 FTE @ a cost of $4,216,000 Average cost per FTE: $130,171

Agency C: 19.5 FTE @ a cost of $4,341,000 Average cost per FTE: $222,636

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So which one is offering the best value for money?

Procurement liked Agency B as it was the lowest cost and the most number of resources giving the lowest average cost per FTE.

Marketing liked Agency A as it was weighted with more planning resources.

But which was the right one?

To answer that you need to look at what is required of the agency from a strategic and operational point of view:

1. What is the volume and frequency of activity? – how may individual jobs per annum and per month, and the complexity and variation of those tasks.

2. What is the strategic requirement? – Is the plan for new produce and service development and launch or business as usual and is the marketing addressing challenging strategic issues or rolling out and existing strategy.

3. What is the production level and complexity? – Are the outputs high volume and low complexity or low volume and high complexity and so on.

Each of these have an impact on the mix of resources, not just across each category (account management, strategy, creative, production) but also in the seniority and expertise mix within each of these categories.

The way we address this at TrinityP3 is, following discussions around these requirements, we develop a customised weighting based on the requirements and apply the weighting to the agency resource proposals.

This can sometimes require the agencies providing resumes or CVs for each of the proposed staff to clarify their expertise and experience.

The weighted resource score is then applied to proposals to give a indexed resource for the agency and a clearer insight in what is being provided in the resource plan.

The result is a much clearer indication of not just the level of resources but the fit of the expertise and mix of these resources to the advertisers requirements.

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About Darren Woolley

Darren is considered a thought leader on all aspects of marketing management. A Problem Solver, Negotiator, Founder & Global CEO of TrinityP3 - Marketing Management Consultants, founding member of the Marketing FIRST Forum and Author. He is also a Past-Chair of the Australian Marketing Institute, Ex-Medical Scientist and Ex-Creative Director. And in his spare time he sleeps. Darren's Bio Here Email: darren@trinityp3.com
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