How To Avoid Agency Sticker Shock

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Have agency invoices ever made you sweat more than a disco ball under a heat lamp? Well, if the answer is yes (and we’ve likely all been there) then this post is for you –  all the marketing warriors who have ever fought tooth and nail for every penny of their precious marketing budgets.

Whether you’re constructing budgets, dealing with overages, worried about budget allocation or perhaps undertaking – or have just completed an agency review-  there are some simple steps to help avoid unpleasant surprises when the bill arrives.

So fear not, brave marketer! This post is your arsenal of ten battle-tested ideas to slay surprise costs, manage your marketing budget like a pro, and finally get a good night’s sleep. So, grab your metaphorical sword (or spreadsheet, whatever works) and let’s conquer those marketing money monsters:

Define a scope of work

Perhaps the most important aspect of budget planning and allocation is to define an annual scope of work and have your agency(s) provide a plan and cost to deliver it. Without it, it’s virtually impossible to allocate your budget in a meaningful way and managing it will prove extremely challenging.

Define out of scope project fees

Having defined your scopes of work for each agency, make sure you understand how out of scope project fees will be calculated, monitored, managed and capped. Set out clear guidelines as to how these fees will be estimated and approved.

Look beyond the rate-card

Even if you’re working to a blended hourly rate or are comfortable with the rates you’ve negotiated, a rate-card is only a menu – it doesn’t define the parameters for which items are ordered.

Understand agency multiples

Everyone deserves to make a fair profit on what they do, but it’s important when engaging an agency or committing to a scope of work that you understand what that margin looks like and how it’s calculated.  If you’re unsure how that works, here’s a simple way to convert  profit markup into a profit margin (and vice versa) using our calculators on our web site.

Benchmark costs

Marketers often ask  “ are we’re paying too much for our agency services…” to which we typically ask, “how much do you think you should be paying?” If the answer is “we don’t know”, then it’s time to find out. We can compare your costs across the board with industry benchmarks to see if you’re getting the most bang for your buck and specifically where in your budget there may be opportunities for improvement.

Know what the extras cost

Particularly in areas where your requirements are production heavy, it’s essential to know what extras cost. Don’t be fooled by those seemingly small costs! Over time, they can explode into a financial monster that’ll leave your corporate wallet whimpering. Dive deep on print and broadcast studio costs, digital outsourcing and other extras to ensure those rates  don’t compound potential sticker shock issues down the road.

‘Free’ doesn’t mean ‘forever’

Many “free” budget items proposed in pitches have limitations – either with complexity or time – or both. Understand true long-term costs and the implications that these may have on your budget after a year or so.

Define success metrics

To help avoid sticker shock, be really clear about your definitions of success for the agency and ensure that budget and cost management form part of any bonus structure you might be contemplating.

Don’t let procurement go it alone

While procurement can provide valuable insight into contract negotiation, they don’t have the intimate knowledge of marketing and strategic requirements that you and your teams do. So if procurement forms part of your negotiation strategy or requirement, take time to ensure they fully understand the nuances of your requirements.

Ask a specialist for our input

In addition to agency search, we specialize in benchmarking, agency evaluation, contract negotiation and resolving cost friction between marketers and their agencies, with proven methodologies and proprietary tools to help shift often emotional discussions into the rational.

There’s no magic to this.  But by following these simple steps, you can turn sticker shock into sweet satisfaction. So take control and become a budgeting boss, so your marketing dollars can work wonders for your business.


Stephan Argent is Founder and Principal at Listenmore Inc offering confidential advisory to marketers looking for truly independent insight and advice they can’t find anywhere else. Read more like this on our blog Marketing Unscrewed / follow me @StephanArgent

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