A full service marketing firm’s highest valued product is their thinking. Asking them to part with it without appropriate compensation can end up costing more in the long run.
Agency compensation is a recurring theme on this blog. I’ve covered the virtues of retainers and the value of being open with your budget. As with other businesses, creative firms need to be profitable in order to remain a reliable resource for their customers. So discussing compensation is key to a successful business relationship.
Current and prospective clients at times are compelled to ask their agency to solve a problem, creative or otherwise, with no obligation. This typically takes the form of speculative creative work. Doing work “on spec” is a practice that fewer and fewer creative firms will do and something that Rains | Birchard Marketing has sharply curtailed. Reasons for this are somewhat obvious, but they warrant explanation nonetheless.
First, when a problem is presented to a marketing firm and the client or prospect is not ready to commit to paying for a solution, this is usually because they are in the early stages of the project or have not yet made a vendor selection. When this is the case, the agency will be lacking critical input and insight into the project. Therefore, any solution they present will be off the mark. So, clients are not likely to get a fair or accurate representation of the agency’s true ability to solve the problem set forth. As a client or prospect, you may inadvertently rob yourself and the agency of the opportunity to find the best solution because you’re basing your decision on a solution that’s not fully fleshed out. So the first cost in an opportunity cost.
However, if the agency agrees to do some speculative work, perhaps because it is required for a complete response to an RFP/RFQ, or an important client insists, the marketing firm will hope to recover the costs for developing the solution from the client at a later date.
Yes, there is a cost of doing business or cost of sales involved, but asking a marketing firm to do work for free vastly undervalues the worth of their work.
If requests cause an agency to incur higher internal costs to earn your business, they will need to charge you more for the business they do; if they didn’t, the agency would either end up taking a loss in the long run or start to refuse to do your work in favor of more profitable work. So the second cost is an actual monetary cost.
The most fair approach for both parties involved is for the client or prospect to be open and honest about the problem with the agency and mutually discuss the best way to find a solution. An exploratory estimate may be a good approach that allows for client control of budget yet assures the agency of a fair return for their time. This is a scenario we have used successfully for projects with big unknowns, establishing a cost to define the requirements of a project that will then result in allowing the agency to further estimate a final solution. This respects the agency’s time in developing a solution and assures the client of a well thought-out answer.
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.