RFPs, Retainers and Ripoffs: The Paradox of Thrift in Agency-Client Relationships
By Rodger Roeser, National Chairman, The Public Relations Agency Owners Association, Owner, The Eisen Agency
I suppose we as consumers are trained to get “the lowest possible price.” We get a high from it. We do it when we’re buying a car or a house, even when we have someone help with home improvement and you’re getting bids for work, that low price can feel enticing.
Think about RFPs – as every PR, marketing, advertising, investor relations or even social media agency owner out there cringes, and every client tries to get the “best possible price” for work (if there really is any work behind the RFP). Great price, but sadly in the agency/client world, rarely does that equal great value and hurts both agency and client, and in fact, our profession as a whole.
Price matters, it’s critical in creating a fair, equitable and mutually satisfying relationship between agency and client. The client needs to feel they’re being provided a fair service for a fair price, that they’re getting their money’s worth, and the agency needs to believe it is earning a fair value for the work it’s being asked to perform. This equity, however, I have found, is often not there – and both sides are equally to blame.
Less Than Professional Communicators
On the agency side, it may feel it’s being held hostage by a low retainer, which often then leads to less than stellar work and effort, or the client’s expectations for the low, low price they negotiated are simply out of touch because “they not paying for the extra effort.”
Regardless of the excuses, this is a real problem in the industry, and needs to be addressed – there needs to be some time taken on both sides and a willingness to listen and learn. A couple of rules:
1) Just like you’re business, the agency is a for profit business and is trying to make money, in exchange for their goods and services, and there’s nothing wrong with that;
2) If you’re not paying the agency for it, clients shouldn’t expect it; and
3) Before you engage, be clear in pricing and expectations. Just because you got the agency to give you a really low monthly retainer may not mean you’re still going to get all the work you’re expecting.
It is #3 that ruins the most well-intentioned programs because the professional “communicators” are simply not communicating.
Be clear the scope of work and the estimated investment of time and hard costs.
Case in point, recently my firm was up against a much smaller firm for a fairly simple PR job. The prospective client shared what they were looking for, which was much more grandiose than grounded, but bless them for having such high expectations. The problem was the fees they expected to pay were not commensurate to the expectations, so when I shared what I believed was a fair price; they balked, and hired the “cheaper” firm …
And proceeded to fire them after only three months.
Why? Because the agency was simply not able to deliver what the client expected for their rather modest investment. The amount of time involved did not come close to what the client wanted to pay. And, try as the agency might to reel in the client and manage expectations, the client, who initially felt they got a great deal, found that the agency could not deliver the work, and left both the agency and the client bitter and disappointed. The small agency was so eager to win the business, they did so at a hefty price. The client called our firm after they fired the first agency, this time the client saying that firm wasn’t very good. Of course, they asked us to do it. But there was no change in the fees – simply unrealistic.
We passed on the work, which more agencies need to be comfortable doing. Unfortunately, this particular client learned nothing and was still looking to get more work than was able for their investment, again feeling that it had to “beat up the agency” in order to feel as though they were getting a good deal. The challenge for the firm was overpromising, and working very hard for very little in return, which still wasn’t as much as the client believed they were entitled to receiving. Expectations on both sides were not clearly discussed, and what the agency believed would be a good beginning that could lead to a larger engagement backfired, and actually hurt their reputation.
The Downward Client Death Spiral
Consider, the underpaid agency tends to feel resentment because they’re working their butt off and not being compensated fairly in their view, so the “bend over backwards to make it work” mentality quickly turns into, “eh, whatever.” On the client side, working internally, you know when you feel you’re not being appreciated – that same dynamic is in play, and for the agency, that’s not good for long term morale. They believe there’s little point in going the extra mile because the agency begins to feel taken advantage of, and underappreciated.
And, a note to clients employing the “beat up the agency on price.” In all honestly most good firms will quickly look to replace that client and simply continue shuffling it down the totem pole of ever more junior level staffers. The line becomes. “They’re simply not worth the hassle.” The client becomes further dissatisfied, account personnel shift and each time the client calls it’s to complain about the work, the bill or the lack of responsiveness. It’s a death spiral of a client engagement, and sadly it happens all the time.
Remember, on the X, Y axis of business, the client’s ability to be a pain in the ass is directly related to their monthly fees. And, clients calling firms saying “you’re our fourth firm in two years,” and we’re hoping this will be different, or our last firm simply didn’t deliver – these are client red flags that expectations and budgets are not in alignment. My favorite is: We don’t have a lot of money, but…
Agencies are hardwired to “help,” but too often, particularly in this economy, you’re killing your own business.
Spitting in the Soup
Clients, give that a good think when you’re beating up your current vendor to save a few bucks – as they spit in the marinara, right? Agencies, you know who your best clients and who you work hardest for. It’s because you feel valued – it’s human nature. A question for the agency executives out there: On average, which clients are always the most difficult to work with? The ones with small budgets or the ones with larger ones?
Small budgets. Why? Because the expectations of those with small budgets are still the same as the expectations of those with large budgets, which simply will not work. The line, “big budget work for small budgets” is simply a fantasy, hanging out with the Easter Bunny and Santa Clause. Can great things be accomplished on small budgets? Of course. Question? Define small budget. Define great things. Exactly.
The problem lies with a general lack of understanding on the part of most clients as to what “things cost,” and what is realistic to receive for the price. Even if an agency charges $0 for its time, it is critical that the client do some basic homework to uncover the general cost of most things. We have had potential clients call us to solicit the costs of a billboard or even a paid newspaper ad, as if the agency controls those prices (particularly for a simple one-off purchase). We’ve had calls for national media relations campaigns and the client is willing to spend up to $1,000 for it. Wow, hold me back. A whole $1,000 for a national campaign? And, of course, the accompanying question is always: “What can you get me for this?” Or worse, “If you get us something, we’ll pay for it.” My personal favorite is, “How much does an advertising campaign cost?”
If any of you know that answer, please share. But it is these types of questions that point to the fact that we as agencies do a terrific job of marketing all manner of goods and services but our own. There is very little understanding of how agencies bill, what they charge, what things cost. So, how about we have a little transparency?
A Frank Client Discussion, Bill
For starters, Second Wind puts out a wonderful report that gives averages of most marketing tactics to at least get a general understanding. And remember, there are online services where you can create free websites, fee logos (or $99 logos) and all manner of cheap stuff. If that’s what you want, buy that – you’re hiring an agency for their time to do the work, and the expertise, not for the paper the trifold is printed on.
Second, it’s critical that you understand clearly how an agency bills – which is generally one of two ways: retainer fees or hourly fees. And, the retainer is generally based on the overall size of the account and how much time and effort is estimated, so in reality, all agency billing is based essentially on the amount of work and time is anticipated to manage the account. This is also why most agencies have “minimum” engagements. For example, $2,000 per month is a common number because this allows about 15 hours of most agencies’ time, and access to their tools – and about the very minimum amount of time, not including the costs of a deliverable, to produce very basic results. Very basic, this is not a multi-faceted, multi-layered, multi-media public relations and ad campaign; this is a few local pitches, some press releases and a couple interviews.
Agencies need to come out and be honest, manage expectations from the very beginning. Clients, you need to start asking better questions. Quick math problem: If the agency charges $100/hour for staff, and you meet with two staff members for two hours, what did that cost you? $400. Time is indeed money, and in this business, you get what you pay for. Clients, ask what the agency marks up (yep, most mark up things when they buy them for you). This can vary from 10 percent up to as high as a 100 percent mark up on things, so be clear.
Let me add a simple time management point here to illustrate the larger point: If the agency recommends a stock photo that costs $25 to purchase, and you don’t like the stock photo and advise them instead to continue to provide other options, remember, the time they’re spending “finding other options” is your money. So, instead, ask the agency to provide you with their recommendation. If you don’t like that, hop on thinkstock.com or istockphoto.com, call up the firm and go through it collaboratively. In other words, don’t spend $500 in time for a $25 item. Work together, and don’t say “Well, you’re the expert you should know.” The agency already gave you their suggestion, it’s okay to work together – you’re on the same team. Agencies don’t come equipped with crystal balls or mind reading equipment, and in this industry, we deal with such subjective things that it’s important to collaborate. The client controls how much time an agency is spending, so direct them accordingly to do what you need done – communication.
You want the agency to have the ability to be proactive, to pitch, to screen, to find cool ideas to present. If you’re not willing to pay for that time or that effort, you can’t expect to receive it. Without this ability (which is typical for a retainer relationship), the agency becomes reactive to your orders and needs – like a fast food restaurant. It must then wait for you to give orders to move. You want your agency seeking ideas and putting together good programs? You want them pitching, keeping their eyes and ears out for opportunities, making connections? Clients need to encourage this, and of course, pay for this.
But How Much?
Exactly. As you discuss in your initial meetings with the agency, your first step as a client is to collaboratively work with the agency to create a plan, a program and a budget of time contained within the marketing mix. This is a not a “proposal,” this is a plan – and you should pay for it. A proposal is of zero value, because that’s what you paid for it. It is most likely as useless as a bell that never rings or a bird without wings. Don’t ask for a proposal –that’s agency code for “the client wants free ideas,” which may or may not have any merit – there is no way the agency can possibly know what you want or what is genuinely needed in a blind proposal.
A good program begins by working collaboratively to achieve an agreed upon and understood set of goals, then discussed and agreed upon scope of work, investments and expectations. A good agency will educate, and a good client will share – not obfuscate. If you have a budget, share what the budget is so work can be prioritized. You might be surprised how many times I’ve found clients overpaying for their marketing. A good agency will give you great work at a fair price. The cheap agency won’t deliver either. So, don’t be fooled by price. I actually had a client ask me if I could do anything about the postage. I’ve had others ask if I could cut the cost of the taxes.
Seriously, they’ve really asked. Clients, don’t be that guy. A good firm is not there to take your last dime, they want to do great work for you, but they want to be paid fairly – after all, you don’t give away your work, they shouldn’t either. You ask the agency to understand your business, take the time to understand theirs a bit as well. I encourage all agency owners to have an agency/client orientation at the beginning of all engagements.
Take the time upfront to set expectations, understand costs and investments and work together to create a nice harmony in your marketing. At the end of the day, the client wants the agency to do great work, just like hiring a contractor to work on your house. Do you want the cheapest or do you want quality craftsmanship? If you’re hiring a “quality craftsman” that you’re paying peanuts, your expectations should probably be in line with what you pay for – you get what you pay for.
I can guarantee every client out there that every agency (including my evil competitors) wants to do a very, very good job for you. I promise that when they won your business, they were thrilled. Keep that passion alive the same way you do with a marriage – good communication. Find agreements up front, ask the right kinds of questions, trust your feelings but don’t go blindly into the relationship because you “like them.” Take your time. Set goals. Set expectations of work and budget. You’ll be glad you took the time up front. You’ll be happier, the results will be better, and you’ll get a raise.
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Rodger Roeser is the owner of www.TheEisenAgency.com and the national chairman of the Public Relations Agency Owners Association, and is one of the nation’s foremost experts on marketing and public relations. He works with public relations firms across the country to assist them in becoming more successful businesses, and with organizations seeking to hire firms to properly vet and develop strategic communications programs. He is the owner of Greater Cincinnati’s premier public relations firm The Eisen Agency, and is a former award winning print, television and radio journalist.
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Bravo, Rodger, bravo! This is one of the most cogent, concise and compelling summaries of how to build a successful agency-client relationship I’ve seen in years. As you note, it pretty much all boils down to clarity in communications, reasonable and responsible expectations, and mutual respect. And you hit the nail on the head in highlighting that human nature is human nature. If we feel like one person is treating us better than another, it’s not too hard to figure out which one will get our best work. Business transactions today are no different than business transactions a decade, a century or a millennium ago. We just have smart phones.
To your point that agencies should consider passing on bad business more often, I’d like to share our most recent post about just that. We not only had the “we don’t have much money” and “but this other agency is willing to give it to us cheaper” lines; we had the “if you stretch your fees over a couple of years until we’re profitable, we’ll pay you a bonus” tale, as well.
We resigned in mid-pitch and bade them well.
Here’s a link: http://forgecommunications.com/blog/?p=300.
Thanks again for a great post, Rodger. I look forward to sharing information and ideas with you in the future.
Warm regards,
Roger
Roger M. Friedensen, APR
President | CEO
Forge Communications
@RogerFriedensen | @ForgeComm
linkedin.com/in/RogerFriedensen
thank you Roger, that’s very humbling to read. I do work with agencies all across the country as well as client side to help them find and have a more rewarding experience. your line on “passing on the bad accounts” is gospel, my friend. Some clients have no business working with agency, they’re too unprepared and lack even basic understanding of how to create mutually beneficial working relationships.
Great article. Should be required reading for all agencies and clients. Managing expectations is really important but if a client is stuck on big results in a hurry, they probably don’t want to have their expectations managed. While the retainer model provides steady monthly revenue for an agency, it can be difficult to manage. On a $3,000/month retainer, clients might get $5,000 worth of work one month and $1,000 the next, depending on what’s happening with their news in any given month but some still find it hard to pay in a month that they feel the agency “didn’t do anything”. One of the worst situations to be in is when a client comes to you after firing another agency a few months into the project. While the first agency may have been incompetent, digging a little further usually reveals a host of other issues (e.g. out-of-control expectations, not enough money, etc.). Unless they can successfully realign the client’s expectations, a second agency which takes on this account is in a no-win situation – the results will still be hard to achieve, they’re going out with news that is no longer “new”, and the client is already angry because they’ve “wasted” money on the first agency they hired. We usually passed on these scenarios.
I ran a mid-sized agency for 8 years and now as a freelancer, I find I’m better able to meet expectations and turn down business that is not a good fit for me. But that’s easier when you don’t have employee salaries.
Joining in the above comments with a “bravo.” Though I am now a freelancer, I have worked in numerous agencies and every point here is spot on.
I love to do work for smaller, nimble clients but almost without exception they have ridiculous expectations for their investment.
It’s not usually their fault; they haven’t been educated, but there are too many agencies/consultants who will take the work anyway and everyone ends up feeling dissatisfied.
Anyway, agree with above that this should be required reading for all agencies and clients!
Fantastic piece, Rodger. Thanks for clarifying the issues and validating our experiences over the years. Will definitely be useful the next time we receive the “we don’t have much money now but we want you to grow with us” pitch from the client side. Makes us feel better about the times we walked away. Best wishes, and look forward to reading more from you!
Right on target! We as agency owners need to read this prior to speaking with prospects/new clients, especially as regards retainers! Thanks for sharing…
(originally posted to LI)
Good article. As a planner, I would say that the key to the issue is a common misconception in business: that of being Effective vs being Efficient. And I have conferred a lot about it.
Effective means the capacity of attaining the expected goals stated by the promoter of the activity.
Efficient means the capacity to achieve those goals at the lowest possible effective cost.
And although these concepts may seem interlocked, and they can be considered so, they are totally independent and usually they mean totally different outcomes.
If the attainment of the goals is determined to be the primary concern, even though for a limited time, cost will need to be subordinate to the decision of how to attain the goals. That is because the organization has determined that without the attainment of the goals there is no real object in playing its part.
However, if cost is decisive and crucial to the organization, the attainment of the goals has to be dependent on available resources and goals achievement will have to be prosecuted in relation to the available resources.
You were totally right in your approach and the outcome reflects your soundness of judgement.
In the future I suggest you and anyone for that, devote a stretch of the conversation with the prospective client telling them to position themselves in this crucial point and assign priorities relative to effectiveness vs efficiency. It may seem obvious for some, even insulting for others, but in the end they’ll have to make a selection.
And as the knight told Indy: You must choose wisely…!
Rodger, great article. Too many firms overservice and underbill for their work, based on the fear that the client will walk if the price rises. It’s BS! Clients I know are happy to pay for a great job, as long as they understand what you are doing and are educated along the way about what takes time and costs money. They don’t like surprises, and they don’t like martyrs. If they do want to “beat the agency up” — they are not a client worth having. I wish more agency owners and managers had better business training.
Thank you, Roger. This is exactly what I needed to read. In fact, I think I’ll tape it to my bathroom mirror and reread it every morning. My clients are mostly nonprofits. I become so passionate about accomplishing their mission that I usually overservice my accounts which, of course, ends up hurting my own business.