When negotiating a new agency contract, marketers invariably ask for the agency rate card to help make their decision on determining their projected costs.
While that’s a reasonable starting point, it’s inherently flawed if the evaluation or negotiation stops there. It’s a bit like looking at a menu in a restaurant and trying to work out the bill before you’ve chosen anything.
The agency rate card is just one metric that marketers should be thinking about when negotiating their agency contracts to protect themselves – and in fairness, their agency partner. To whet your appetite for more detail, here’s a menu of things to think about beyond the rate card, helping you dive deeper into the numbers and get a meaningful look at what things are really going to cost:
The appetizer: Fundamentals
While rate cards show you individual rates, you should also look at the fundamentals that go into those rates. Those fundamentals can include number of billable hours in a year, overhead and profit margins, and ‘other costs’ all factor into how the rate card is compiled and what to expect when it translates into a retainer, contract or other remuneration agreement.
The main course: Scope and staffing
By its very nature an agency rate card can’t contemplate a marketers planned scope of work, and without it an agency rate card is virtually meaningless. To get a clear picture of what your annual costs are really going to be, you need to define your activity for the year and marry that up against the agency’s proposed staffing plan, together with proposed seniority levels for each resource.
A choice of sides
Studio costs, out of pocket expenses, third-party costs and partner costs don’t typically show up in a rate card. And while some of those costs can be reasonably insignificant on a one-time basis, they add up fast month over month, so you need to have discussions about what additional costs you should be budgeting for and how they’ll be charged.
Dessert: La Bombe Surprise
Another unwelcome surprise to avoid is that rate cards never contemplate overages, overtime, or work that’s deemed to be out of scope. If you want something extra, or want to plan on a contingency basis, you don’t want to be left trying to micro-manage costs from an agency rate card because it’s not practical or accurate. Conversations about authorizing costs surrounding additional work need to be pre-negotiated rather than argued about later.
The bill: Service and performance included
While the rate card can give you insight into how costs are made-up, defining service levels and performance expectations need to be discussed and defined during negotiations. If you’re contemplating a payment by results component to your agreement, or want to tie service levels to financial remuneration, you need to look well beyond the agency rate card and define your performance requirements against an agreed profit pool.
These are just five reasons to look beyond the agency rate card when negotiating or renegotiating agency fees, rates and contracts. But if just the thought of all this is giving you indigestion, consider talking to your friendly agency management consultant who specializes in financial and contract negotiation.
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