BY MATTHEW BIRCHARD
A common question we’re asked when talking with prospective clients is how our services are paid for. In general terms, we provide professional services that are billed based upon calculations of time spent multiplied by an hourly rate; the same as a lawyer, doctor, plumber or electrician would. We’re highly skilled in the services we provide to our clients, and our rates are commensurate with our abilities and by and large tend to be on par with industry norms. But, to someone who has not worked with a marketing or advertising agency before, there are often questions about how we place value on creative work. This brief overview should answer the basics.
First and foremost, we seek to make financial relationships with clients fair to both the client and the agency, and for them not to get in the way of a positive client/agency relationship. With that in mind, Rains | Birchard Marketing employs three primary compensation methods.
Retainers or Fixed Fees have many advantages that have kept them a popular compensation method for professional services. In many cases, clients will have a fairly consistent level of needs over the course of a year, and the costs to meet these needs can be accurately projected. Retainer based compensation then allows a client to easily budget for the majority of their marketing expenses while also allowing the agency to forecast revenue. Retainer fees are set on an annual basis, billed monthly. In doing so, the agency recognizes that there may be a month or two a year with a high level of activity, a major trade show or event that will cause the level of service the agency delivers to exceed the amount covered by the retainer. In this case, the agency will seek to recover some costs during slower periods of the year when perhaps the level of service is slightly below the retainer. This “carryover” method of accounting for time has been shown to be very successful over time. Retainers also foster positive ongoing relationships between the client and agency by allowing the agency to quickly act upon requests or opportunities for the client without awaiting budget approval. Because a client is pre-paying for a set block of the agency’s time, that client has priority within the agency over clients who do not have a retainer. And finally, if a client is willing to commit to a retainer, the agency is often willing to offer somewhat reduced rates in exchange for the commitment.
There are some clients who prefer to work on a project by project basis. This structure is typically used for a client with a more limited scope of needs. With a project based method, the agency will prepare cost estimates for each project, based upon client input, and the client must first approve the budget prior to the agency doing any work. For all estimates, the agency seeks to be accurate within 15% and will maintain a contingency for this purpose. Thus, a project cost is considered approved by the client +/- 15%. If changes made by the client will cause the project to exceed the original estimate, the agency will prepare a Change Order for the additional work for the client’s approval. The additional work will only be preformed upon approval of the Change Order. This compensation method allows the client to only pay for the work they approve and also assures a fair return to the agency. However, because the agency cannot perform any tasks without an approved budget, it limits the agency’s ability to have a proactive approach to the client’s marketing.
Time & Materials:
Rains Marketing follows a process of accurate, daily employee timesheets that record work done against specific client jobs by the quarter hour increment. If a client so chooses, the agency can follow a time and materials billing process for compensation. In this case, the agency will perform the work required to complete a project for a client and bill the time plus any outside costs such as printing or postage for each project. The client only pays the agency when it is working for them, and the agency is assured a fair return.
A combination of methods tends to be the norm for most of the clients Rains Marketing works with. We typically have some retainer relationship with each client, then perform both project based and time & materials work as needed. This flexibility allows us to provide a high level of service to our clients while keeping the payment for our services easy to understand.
Looking for guidance or just need to bounce an idea off someone new? Contact Matt Birchard directly at: 503-297-1791 ext. 1 or via email.