Agency Remuneration Benchmarking For Contract Renewal

 

Company Category: Government Department

Challenging Problem: It had been 3 years since the agency was appointed. The relationship was solid, the client happy with the work, but the contract was due to be tendered.

Many organisations make the mistake of thinking that tendering their advertising services should be a routine. The problem with this is the disruption and the resources it takes to manage is the hidden cost. That does not mean the agency relationships and contract should not be reviewed regularly, but tendering or pitching is not the ideal way to do this.

The Department was granted the opportunity to extend the contract if they could demonstrate the remuneration was market competitive. However, the agency maintained there need to be a 115% increase in the retainer to allow them to recover an industry acceptable margin.

Creative Solution: We undertook a TrinityP3 remuneration assessment and found that the level of activity in the past year would have required a retainer that was 65% higher than the current retainer. But that the scope of work for the coming year required a retainer of only 30% higher.

Interestingly, we had been involved in the pitch process 3 years earlier and had calculated the retainer against the scope of work then to be 65% higher, but it was at this level due to the heavy discounting by the successful agency during the pitch process.

Process: The TrinityP3 remuneration assessment collects data from the client and the agency and using our benchmarks provides insights into the remuneration level, effectiveness and the level and mix of resources required against the scope of work.

Timeline: The whole process took 5 – 6 weeks

Result and feedback: The agency was offered a contract extension at 30% higher than the current retainer which they accepted.

Cost: https://www.trinityp3.com/contact.php