Welcome to the March edition of TrinityP3’s e-news
Reports from around the world indicate that agency fees are on the rise because of inflation and the impact of the Great Resignation on agency salaries. This means that agencies and their clients will be facing some awkward and possibly tough discussions around agency fees, which have been stagnant for more than a decade, and have in real terms reduced.
So, what is the answer to developing and agreeing a fair and sustainable agency fee model? We have prepared a Comprehensive Guide for Marketing on Agency fees, which you can find here
Plus, we are giving you an opportunity to have your say in two important industry surveys. The first is for everyone working in media, marketing and advertising and investigates the hidden cost of pitching. The second is a survey by Bond and Swinburne Universities and is looking at the creative industries as we head into a new post-COVID period and is for agency people only. We hope you find this informative and thought provoking.
Unfortunately, most people are just making an educated guess on agency fees
Would it surprise you to find that many agencies set their resource plan to the agreed fees? In the absence of any quantifiable scope of work the best the agency can do is guess the resources required. Others use a rule of thumb based on old fashion benchmarks such as effective media commission or working to non-working ratios.
Or that some consultants will evaluate the proposed agency fees based on the hourly rates or the salary, overhead and profit margin calculation? This does not evaluate the level of resources or the mix of resources to deliver the advertiser’s needs, which is usually guessed.
Or that procurement will think that by competitively tendering the account, the sample of financial proposals will provide a commercially sound evaluation of the most appropriate fee? But why is the lowest cost response often considered the best?
The point is all of these are at best guesses. Often guesses based on experience, but nevertheless guesses. And yet something as important as a fair and sustainable agency fee is too important to leave to guessing, isn’t it? Find out why here
What’s the hidden cost of pitching? Take the OUCH! Factor Survey
Do you know the hidden cost of pitching?
How much does it cost the agency?
How much does it cost the marketer?
How much does it cost the industry?
Why agency fee value is more than simply the hourly rates
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 for 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. Find out more here
SURVEY: Have your say on the organisational responses of agencies to the COVID Crisis
Bond University, Swinburne University of Technology and Suits & Sneakers are undertaking a research project on how the COVID-crisis has impacted – and probably is still affecting – creative work in the advertising and communication industry.
It may be time to relook at your model with our Agency Fee Decision Tree
In our almost twenty years of experience in developing, designing, implementing, and benchmarking agency fees there are about ten main models and then literally hundreds of hybrid combinations of these models available to advertisers, marketers, and procurement professionals.
These agency fee models are not just for media and creative agencies but can be used across the entire marketing supply chain for public relations, digital and mobile, content marketing, influencer marketing, social media and more.
Each one of these models has its advantages and disadvantages making them great in some circumstances and completely wrong for other situations. So how do you decide what is the best agency fee model for you and your agency?
We have combined our vast experience across multiple agency disciplines, markets and advertiser requirements and developed an Agency Fee Decision Tree, which you can read about and access here
Most in Demand for this Month
The TrinityP3 team helped our clients on the following projects last month:
Internal marketing alignment for a financial services provider
Briefing process design for a global fashion brand
Roster-wide remuneration benchmarking for a telecommunications marketer
Media agency commercial assessment for an FMCG marketer
Global media agency performance assessment for a household goods brand
Media agency commercial assessment for a further education provider