You hire an agency because they have more expertise in a particular field than you do. So, don’t expect that you can budget a project better than they can.
I spend perhaps a disproportionate amount of time writing about financial arrangements between clients and agencies. One reason for this is it can be a point of friction, and friction is not conducive in the long-term to positive client/agency relationships. In fact, it’s the first tenet of my agency’s Terms & Procedures that accompany every proposal sent to a perspective client:
In establishing financial arrangements with each client, the agency observes the following principles:
• Financial matters should be fair to both parties and not get in the way of a positive client/agency relationship.
So when discussing a new project, one of the questions I always ask clients is about budget. This helps me to understand the importance of the project in my client’s mind. It also gives me insight into how effective the agency may be on the project.
With any marketing undertaking, you first need a goal, then a sound strategy and some tactical ways to execute against the strategy, which are hopefully measurable. But, if the budget won’t support the tactics, can you fulfill the strategic goals of the project?
Let me stop right here and acknowledge that yes, everyone is on a limited budget. Even if you’re spending millions each month on media, nobody has a limitless budget. But here’s the thing: regardless of the actual dollars you have to allocate towards marketing, you should work with your agency to help determine the appropriate distribution of those limited dollars to your strategic goals.
Budgeting is really all about expectation setting and defining the scope of a project. Every opportunity I’ve had to sit down with clients and do strategic planning has lead to a running list of strategic goals, and an even longer running list of potential tactical ways to achieve those goals. We both know that we can’t have it all; that capacity, cost, and leadership approvals, among other factors will impact our ability to execute on the tactics aimed at hitting the strategic goals. But budgeting is a tremendous guide in the process, and it’s vitality important that the budget be realistic.
And here’s the thing, not realistic for the project might mean that the budget is set too high. If we spend too much unnecessarily, what’s the opportunity cost of the other items on our list that we won’t be able to tackle? Even if it’s unsaid, the goal is to obtain the best value for the budget. Yes, agencies need to get creative with budgets at times, but the end result needs to somehow be tied to the value the client receives for the work. I’ve been party to “pet projects” that have used more than their fair share of budget — rationalized by my client as something that warranted the added expense. At the end of the day, that’s the client’s prerogative as they’re paying the bills. But, from the agency’s perspective, I’d really like to see my client be successful and contribute to that success through our partnership in marketing. If we spend too much on too many projects that don’t really need the extra backing, we will, without fail, end up skimping on something that could benefit from an increased budget.
Of course, more often than not the perception is that a budget may be too low for a project. I like to think that my agency in particular is a good value. We apply our creativity to more than just the design, but also the approach to a project and the resulting utilization of the budget. For instance, we might be tasked with a packaging job, and knowing that if we can devise a folding carton that only requires printing on one side, that will reduce the downstream production costs for our client. So if keeping the inside of the carton blank won’t compromise the performance of the piece, I think all would agree that’s a smart use of budget (this is value engineering). But we do inevitably get into situations where the stated budget for a project simply won’t allow for it to be successful. And here’s where we can get into the friction that I try to avoid. It’s a tough spot for the agency to be in where we know that we could deliver a project that may meet most of the requirements, but due primarily to limited budget, it won’t work out the way the client intends. So, if the agency undertakes an underfunded project, who’s fault is it when it predictably doesn’t yield the desired results?
For me and my agency, again, I’m looking for financial matters to be fair to both parties. That means fair to my client, and fair to me. Just like my clients, I need to make a profit to remain in business, and to remain a reliable resource for them. This is true of every agency, and clients should want to work with profitable agencies for that and other reasons. And agencies want to work with profitable clients. Budgeting therefore shouldn’t be a place to throw fairness to the wind.
So, more to the point of what is a realistic budget. A realistic budget is one that provides enough financial resources to achieve a stated goal while fairly compensating the agency for their labors. I believe it comes down to honest communication on both sides. The client needs to determine how important achievement of the goal is, and if they’re set on the specific tactics to do so. The agency needs to put forth an honest cost that fairly compensates the agency for their expertise, while in their professional opinion gives them the best chance of achieving the client’s goals. And it’s the responsibility of the agency to make the case for the budget being realistic or not. Ultimately, as the service provider, the responsibility of fulfillment falls on the agency. Thus, the agency should have the final say in the budgeted cost of a project, and if the client disagrees, that’s where compromise will come into play. As a client, you should provide good input and collectively discuss project goals, but then trust that when your agency comes back with a cost proposal, it’s what they feel is required to achieve the project goals. In a partnership, this is part of the expertise you’re paying for when you hired your agency. So, negotiate, do a bit of horse trading if you need to, but always assume good intent. Your agency should value you as a client for the long term, and if they don’t deliver value, either by over charging you, or producing unprofitable work, your working relationship will end – regardless of how good the creative is.
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.