Negotiating your ad agency fees can be challenging for several reasons—but when it comes to getting the most value out of your marketing agency, it’s a necessary step.
Often creatives and freelancers sell-by skill and how they value their services—and value is often a matter of perception.
Ad Agency clients need to remember that marketing activities aren’t a simple commodity like buying a loaf of bread; these custom services can build profits for years to come.
What you pay an agency is based on strategic skill, business experience, consumer understanding and creativity.
Here’s a breakdown that I hope will help you the next time you’re negotiating contracts.
Looking to find the perfect-fit marketing agency, but not sure where to start? As a marketing agency search consultant, I help companies find their best-match agencies to grow their brand. Contact me for more information.
1. Support the Ad Agency to do Their Best Work
Marketing professionals tend to be under a lot of pressure to do their best work on behalf of your company. They want to impress their clients.
I firmly believe that clients inspire great agency work, and impact the relationship greatly. And, sometimes this impact is overlooked during the renegotiation of contracts.
Sometimes there are gaps between what the agency feels is fair and what the client wants to pay. So it’s really important the client and the agency get on the same page. Together, they need to develop a clear statement of work, a tool used to evaluate resources and understand costs, that details the full scope and fees.
At the same time, it’s the ad agency’s responsibility to set clear pricing for services and make possible fee fluctuations clear in the initial contract so that when you sign on, you’re aware of where and why things might change.
In addition to monetary support, ensure that the agency has enough time to complete all the project requirements listed in the statement of work.
2. Be Clear About the Value of a Service or Project
The ideal scenario is affordable fees that are fair and reasonable for both parties. The client needs affordable service, and the agency needs to make a fair and reasonable profit.
What business value are you looking to get out of your new marketing partner? Do you have goals or challenges that will require higher-value talent?
Warren Buffett famously said, “Price is what you pay. Value is what you get.”
As yourself, how do value and price relate?
Although fetching a good deal seems attractive, be mindful of possible trade-offs.
Agencies should make a profit from your work together. If they don’t, they may not give your business the attention it deserves in favour of higher-paying contracts. Give the agency a reason to prioritize you with a fair contract that offers value on both sides.
Don’t look for the cheapest. Look for the best value!
3. Start with a Statement of Work
It’s only natural that people on both sides of the negotiating table will feel a little bit nervous going into a new contract for the first time.
That’s why you need to develop a statement of work that is detailed enough to cover all activities so that the agency can give you the most accurate estimate of costs for their best work.
And the great thing is, you can agree to re-evaluate and negotiate the contract on a pre-set timeline or at the completion of certain milestones.
Make sure you share your marketing budget at the beginning, you don’t shop for a car without a budget in mind. Shopping for a marketing agency shouldn’t be any different.
While you’re considering your budget, consider your needs and expectations. Do they match?
Sharing your budget will give the agency a sense of the scope and scale of your project.
Remember that with many marketing services, you’re going to see the value through time. So do try to be strategic about numbers and forecasting while bearing in mind that exact values such as revenue won’t be predicted until later.
For instance, a goal of 2,000 new Instagram followers may not bring any direct sales, but having a high engagement over time will build your brand considerably.
It’s worth looking at overall quality along with specific marketing goals to help determine the potential for new revenue.
4. Regularly Re-evaluate the Statement of Work
What has happened since the last benchmark or project?
One of the main reasons for negotiating a contract might be that the scope of work has shifted per your priorities or the agency has identified gaps.
Normally, these things will change over time, then the contract should change with it.
Be as formal as possible about work scope between periods where you are stopping to renegotiate the contract; you can add or subtract services based on what has been most effective in the past and whether your marketing goals have changed.
Agencies usually work the best today on a fee basis rather than commission like they did in the past.
Job scope, type, structure, skill, and experience will all come into play when setting a fee. For instance, an agency that brings you a high-quality TV ad is more complex and more time-consuming, requiring more skilled resources, will have significantly higher costs than maintaining an Instagram account.
5. Use Key Performance Indicators
Key Performance Indicators (KPIs) can be handled in different ways. You and your partner agency can determine upfront which indicators are most relevant to any given phase of the project and work towards monitoring those numbers.
KPIs should be applied to each project, and to your working relationship, overall.
This will help you “see” the value-added over time and identify gaps that should be addressed when negotiating service contracts. This is critical for any performance-based compensation
using measurable but realistic metrics. Identifying key trends regarding going rates in your industry can also help you understand why things are priced a certain way.
Get Expert Help Negotiating Ad Agency Contracts
A great client-agency partnership isn’t out of your reach. Start by seeking out expert help to find the best agency in your area and lead negotiations.
I lead negotiation with the agency on behalf of the client, leveraging proprietary benchmarks created over decades of experience with agency searches.
I can help you to:
- Evaluate financial and resource plans against needs
- Assess fit to business goals and industry norms
- Compare hourly rates to proprietary benchmarks
- Identify opportunities to add value: services, resources, reduced cost
If you want to learn more about how I can help, please reach out!
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