Agency Compensation. Haggling over scope and cost!

Why does it always seem that agencies end up haggling with clients, like vendors in an oriental market, in order to be paid for the work they have already done?

I was looking at various video uploads on YouTube the other day when I came across this clip. Initially I laughed my head off because it was such a good spoof on how we as agencies struggle to be paid for our work. Take a look at it and you will see what I mean. This is really funny.

 I emailed the link to a few close agency friends, but then started really thinking about the message and the ludicrous situation we find ourselves in. No other business that I know of would accept this type of customer relationship, yet I believe that we only have ourselves to blame.

The answer to the question I am certain that you are asking yourself as you read this is, “Yes, there are clients who have no conscience and take the opportunity to nickel and dime agencies whenever possible. Most however, are prepared to pay for the work if they believe that they are getting relative value from the agency.

It all starts with the fact that we as an industry will gladly spend thousands of dollars of our own money on a speculative basis to pitch a new client account. With odds that can start out as large as 35-1, or at best end up being 3-1; we invest our money, our time and our best talent. In turn, the clients have learned that they can engage the best talent in the agency business at no cost to themselves, and only end up paying for the one they want. And to top it all, some clients even specify that all speculative work becomes their property, whether the agency is selected or not. We taught clients that this was possible.

Our laissez-faire approach continues into the day to day work with existing clients and on projects. At the first sign of an opportunity, most of us rush head long into starting the work with very little up front thought and due diligence. Instead of asking the right questions or taking the time to consider the circumstances influencing the situation, we make assumptions and before we know it we have invested more into the assignment than it’s worth to the client. Sound familiar?

Here are a few things to consider the next time before getting started:

• The relative strategic importance of the initiative. Is it a key part of the strategy or just a quick tactic to address an immediate issue? The more tactical the assignment, the less important it is likely to be and therefore it will probably not come with a generous budget. Allocate resources, time and effort accordingly.
• Who initiated the assignment? How often have you gone down a road based on an idea or brief from a junior person, only to have it die an unceremonious death when more senior client team members got involved? Guess who eats that cost.
• Ask questions up front and listen. If you are not absolutely clear about the client’s expectations, budgets, timing and anything else go ahead and ask. Often we are too scared to ask in case we don’t like the answer. We believe that if we go ahead and do it we will be paid for it anyway. Not!
• Client focus and expectations. Make sure that you understand what the client expectations are and what outcomes they are expecting. I have seen a brief for a quick and simple direct mail letter that should cost no more than $1200 turned into a Ben-Hur production costing ten times as much. No surprise that the bill was not paid.
• Clear and detailed client contact reports. Whenever you are requested to initiate, change or re-do an assignment, the request should be clearly documented in a clear and concise contact report sent out within 24 hours of the meeting. It makes everyone’s life easier and often avoids the ensuing conflict.

While you will never avoid these situations you can minimize them. I think you might be surprised just how much more profitable that client account could be.