One size does not fit all – creative agency remuneration models
The most common and complex frustration of many clients is finding a creative agency remuneration structure that is relevant to campaign volumes, and is transparent and flexible. It’s an area of marketing value management that we’ve worked hard to master.
We are privy to a wide range of remuneration models; from the old school system of paying an agency a percentage based “service fee”, to fixed fee services, plus the Enth Degree proprietary models focusing on quantifiable outputs.
The point is that there will never be a definitive “best” model because each client’s requirements differ.
Agencies are open to considering different remuneration models. Their focus and concerns often relate to the level of remuneration and the anticipated revenue, rather than how it will be modelled or structured. So it is imperative that before deciding on a remuneration model, an analysis is undertaken to determine the most appropriate model for the client’s needs and agency output, rather than focusing entirely on simple percentages or hourly rates.
Our experience in working with clients has uncovered some remuneration models resulting in frustration and dissatisfaction. For example:
- One year after winning the business, the agency presents a fistful of timesheets and requests a 50% fee increase. And they still don’t understand the business!
- 40% to 50% of the fee paid is for Account Management resources, when it is high level of creative and deliverable-based resources that are required!
- When clients paying a fixed fee realise that studio/production supervision is not included, so there’s been no clear picture of how much is really being paid to the agency in annual fees! (We see this far too often. In fact one client thought the annual fee was $750,000 until we audited production invoices and calculated the actual agency revenue at $1.25 million).
The remuneration models that we design for our clients address these problems, are relevant to the scope and volume of work, and are fair to all. With so many models in market, there is no reason why tailored remuneration cannot be designed to optimize marketing investments and the performance of marketing departments and their agencies.