This post is by Darren Woolley, Founder of TrinityP3. With his background as analytical scientist and creative problem solver, Darren brings unique insights and learnings to the marketing process. He is considered a global thought leader on agency remuneration, search and selection and relationship optimisation.
The perennial question from marketers and their procurement team is “How much should I pay my agency?”. And as you can imagine this is even more complex than the question “How much does a television commercial cost?” But at least with the question on agency compensation there is a relatively accepted methodology on how to calculate a fair and sustainable model.
We have created a number of tools to help marketers answer this question for themselves including the TrinityP3 Resource Rate Calculator Mobile Business App and the Ad Cost Checker rate benchmarking site.
In this video I put the whole process together to answer this important question. And yes, ultimately we are able to actually help you answer it based on our extensive database of agency rates, resource requirements and scope of work data in more than 50 markets globally.
But in the meantime here is some food for thought on answering this question.
How much should I pay my agency you ask?
I will tell you.
As much as required to cover their direct salary costs, recoup their overhead and make a fair and reasonable profit.
What’s that? You want a dollar amount? Okay.
What is the agency going to do for you and how often?
How efficiently do you work with the agency?
Is everything at the last minute or do you have rounds and rounds of changes just trying to get the work approved?
To calculate how much you need to pay the agency
You need to know the answers to these questions:
1. What is the agency going to do or produce for you?
2. What is the level and type of resources they require to do this work based on the way you work with the agency?
3. What is the mix of resources required in regards to senior, junior and everything in between?
4. What is the cost of these resources based on the quality of the people capital required?
5. What is a fair and reasonable overhead in profit margin?
These are the five questions that allow us at Trinity P3 to accurately calculate the answer to your question.
So how much should your pay your agency?
If you want to find out the answer, let me know.
At Trinity P3 we have answered this question for hundreds of advertisers in more than 45 different markets around the world. I’m confident we can answer it for you.