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Global Marketing Management Update
10 November 2021
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Welcome to the November edition of TrinityP3’s e-news |
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You will have read about the Great
Resignation. The global pandemic has increased the rates of resignation as
people re-evaluate their lives and careers. And while the great resignation
appears to vary in degree across markets, there is enough anecdotal evidence it
is impacting the advertising industry, particularly in established markets such
as the USA, Canada, the UK, and Australia.
After a decade or more of flat or only
moderate salary increases in the advertising industry, the great resignation is
causing a perceived talent shortage, leading to increased salary costs to
retain or attract talent to the agencies. Increases of 20%, 30% or more have
been thrown about, as agencies fight to keep talent, and compete to attract
talent from a diminishing pool.
This can only mean upward pressure on
agency fees, as agencies try to pass on these increases to their clients
through hourly rates and retainers. So, what should marketers be doing? You
could ignore it and expect your agency to absorb the cost and you may be lucky
you do not suffer a rapid increase in agency staff turnover.
A better option is to understand exactly where your
current agency fees sit compared to market and prepare yourself for the
conversation that is coming. This month we are sharing the information you need
to make more informed decision on understanding your agency fees and how to
manage them in the face of the Great Resignation. |
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Why agency hourly rates are no measure of value
What represents value when you are looking at agency fees? Often marketers and procurement professionals will look at the agency hourly rates as a measure of value. The lower the rates or the lower average rate per full time equivalent (FTE) resource the better the value. Of course, this is based on the assumption the agencies being compared have like-for-like resources and titles.
But is this really value? All other things being equal, is best value simply choosing the agency with the lowest rates? While this may appear logical it is a flawed approach to measuring value. We have a different approach that goes beyond hourly rates and gets into the cost of the agency to deliver outputs. When the cost of these outputs is considered against the quality of those outputs or at least the ability of the agency to deliver a required quality of output then you have a measurement of value.
Read more on this here
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Calculate your agency fees for free
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The TrinityP3 resource calculators let you turn hourly rates into salaries and salaries into hourly rates and more.
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Learn from the past or look to the future for agency fee value?
Wondering if your agency fee is fair and reasonable? When we benchmark agency fees against a scope of work there are several ways we can do this: we can assess the performance of the past; we can benchmark the present; or we can calculate the fees for the future.
Many marketers will favour focusing on the future. They will want to ‘fix’ the issue of the agency fees going forward. At best they will simply want to benchmark the present to ensure the fee is the right level for the moment. But it is more insightful and valuable to assess the immediate past and use these findings to inform the present and the future. Here is why.
Scope MetricsTM, developed and used by Farmer & Co and TrinityP3 calculates the agency resources required to produce everything from brand strategies to Facebook updates and everything in between. Currently, there are more than 3,500 distinctive outputs for creative, digital and media. For content, these are classified for origination, extension and adaption. For media, the Scope MetricsTM units are based on media channels, investment levels and campaign and stakeholder complexity.
Read more about this here
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Benchmark your agency fees around the world
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Find out how your agency fees compare to market in more than 20 markets.
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Five ways to manage agency fees more effectively
Since the mid 1990s Farmer & Co has been developing and using the Scope MetricTM
Units (SMU) model
to measure agency productivity against advertiser scope of work for content agencies such as creative, digital and activation. TrinityP3 had been collecting on media agency scope of work for almost two decades used to create a media version of the trademarked Scope MetricTM
for media, or the Media Scope MetricTM
Unit or MSMU
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But this is about the various ways marketers and advertising agencies can use both SMUs and MSMUs not just to measure the units of resources required to deliver the outputs or deliverables, but also to use this to create a fair, sustainable and accountable agency fee model that is value-based rather than simply resource cost-based.
These five applications of this fee benchmarking model include:
1. Reconciling agency fees to outputs and deliverables
2. Efficiently calculating agency project fees
3. Developing a value-based pricing model
4. Calculating agency retainer fee with and without a scope of work
5. Measuring and improving client / agency productivity
Read more about this here
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What’s Hot
Here are the most read, most shared and most commented on articles from the TrinityP3 blog in the past month:
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