There are many different contracts that exist within an agency/client relationship. [refer: Agency/client contracts: signing on the dotted line]. A retainer agreement is the contract valued the most, yet it is also the most complex and difficult to hammer out.
One of the hardest parts of running an agency is the lack of regular cash flow, primarily due to agencies invoicing on completion of a project or campaign. There are several challenges inherent in the project process that can restrict cash flow:
Because an agency's fixed monthly expenses still need to be paid, a great way to keep the cash flowing is by getting as many clients as possible onto a monthly retainer.
A retainer is an amount (usually fixed) that your client agrees to pay to your agency per month.
In return for an ongoing monthly payment, your agency will agree to supply specific services within that month. The retainer could cover services such as design, creative or art direction, account management, strategy, copywriting and research.
Think of a "retainer" like a subscription to Netflix - something that gets used regularly that you have easy access to; as opposed to buying the occasional movie online. Like any subscription, the "value" of paying a fixed rate needs to be both proved and used on an ongoing basis.
Many agencies struggle with selling retainers because they are (1) afraid to ask their clients for a monthly commitment; (2) they do not fully understand how a retainer can benefit both parties; or (3) they are not able to communicate the value of a retainer to their clients.
The way to answer these consideration points is to ensure that they are all covered in the wording of the retainer agreement. Your objective is to avoid any "grey" areas going forward, and your retainer agreement should be the document you refer back to for any questions and concerns.
Right from the start it is important for both parties to acknowledge that some months may favour your agency and some months may favour your client, and that a "swings and roundabouts" principle may need to apply. That is why a review of the retainer should be made after an agreed period of time (e.g. 6 months) to see if the current format (and fee) is working for both parties. There should be wording within the retainer contract that allows for this review and for alteration of the contract if required.
Any agency which charges soley by the hour will find it difficult to make fat wads of cash (true!). There are only 24 hours in the day and x-number of employees, so there is always a maximum amount of hourly revenue that can be charged.
If you set up your retainer based on a fixed number of hours, then you could find yourself facing the following issues:
The better solution is to sell your client on what you will do for them every month, and demonstrate why it will bring value to their business in the long-term. You could add in a section on how the work covered within the retainer will result in a tangible ROI for your client and help achieve their marketing goals.
The retainer agreement should clearly state:
If you are sure that a retainer will benefit both your agency and your client; if you are confident that you can talk about the value of your agency; if you have all your information and calculations ready; then just put on your negotiation-hat, take a deep breath, and...ask!
Never venture, never gain, right?
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Research activities are typically initiated and conducted by your client, as part of their marketing remit. However, there is another type of research that is advertising-specific and is more likely to be initiated (or at least recommended) by your agency rather than by your client. The two main areas of research that an agency would get involved with are ‘pre-testing’ and ‘post-testing’.
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