As the wider world becomes more and more unpredictable and the world of work more fluid, Studio LWD’s creative director, Laura Weldon, asks in times of instability, is it time to rethink the old marketing staple of the agency retainer? And if so, what are the options?
According to Heraclitus, a Greek philosopher who lived around two and a half thousand years ago, “the only constant is change”. A lot has happened since then obviously. And, as predicted, many things have indeed changed. One fixture that seems to resist the flow of change though, like an iron pole wedged in the riverbed of agency-client relations, is the marketing retainer.
Like many a “best bad solution”, both clients and agencies have a love-hate relationship with retainers. But trying to develop a better solution has frustrated many.
Don’t get me wrong, the reasoning behind retainers is often sound. They provide the client assurance of swift service to developing needs without getting bogged down in the admin of quoting for every individual job. They also allow for simple budgetary and financial planning for both parties.
The downside is that, in reality, workflow comes in peaks and troughs. A well planned retainer usually represents an average across the year, with some months busier than others. Effectively agencies often “over service” clients in some months and “under service” them in others, with the aim being that the monthly charge will reflect the overall average across the year.
While this is the aim, few could claim that the aim is always bang on target, which can cause friction with client-agency relationships. For a start, to achieve an effective average, agencies have to tie clients in for e.g. twelve months at a time. This can leave clients feeling, well, tied in. On the flip side, agencies might well end-up delivering a huge amount of work in the first six months, and then much less in the second, giving the client the false impression they are paying the agency to “do nothing”.
Overall, in a digital world, it all seems a bit analogue as an approach. But what are the alternatives? Some have suggested a better alternative to retainers is a value-based pricing model, where the agency charges based on the value they create for the client, rather than the time or resources they spend.
The idea is that value-based pricing allows the agency to align their goals with the client’s goals, and to demonstrate their impact and ROI more clearly.
That sounds great on paper. But I don’t know of anyone who has come up with a way to actually track that and effectively create a fair pricing model from it. No one who is still in business anyway.
At Studio LWD, we recently launched ‘Hour Blocks’ charging as a flexible alternative to retainers for general branding and graphic design requirements. Instead of paying a fixed fee per month, clients buy blocks of hours in advance which the agency use up as working requirements are briefed, with the client then able to top-up as necessary.
So far, clients who have used it have loved it, because it means all paid-for hours are attributed and accounted for so that they can see every penny they pay out is delivering an output. And while the pay-as-you-go model is attractive to clients, it also works for us as an agency, as we effectively are being paid in advance, which is great for cashflow.
We firmly believe that finding ways to work better can help the industry as a whole, so I would be happy to explain how Hour Blocks works to anyone. Let’s kill off the retainer for good!
