A price that combines the commitment of retainers v project-based flexibility
Seeking reactionary solutions in an uncertain world, the requirement for marketers to do more for less has become increasingly important. With brands craving flexibility for leaner budgets and agencies needing stability, both sides are working hard to navigate a happy medium.
Like the global recession of 2007/2008, the pandemic has seen a shift away from retainers to project-based work, and a big question to answer is whether brands are ultimately paying a higher price for it…
What’s the difference between retainers v project-based?
A retainer is a recurring agreement that reserves a set amount of time and resources for a regular fee. Typically monthly or yearly, this provides both parties with a level of consistency.
Although appealing from an agency perspective, it can be a huge burden for brands during times of economic instability. Rapid changes in the market mean that they need to pivot and redirect resources quickly, which can be difficult to do alongside regular retainer confinements.
In contrast, project-based services are normally used on a campaign-by-campaign basis, and mean that agencies will support specific pieces of work, defining goals and outputs, rather than on a regular payment schedule. A project-based model appreciates the roster of resources used by brands beyond an Agency of Record, and allows for greater flexibility.
From a brand’s perspective, project-based work doesn’t always provide the deeper relationship nurtured during a retainer, and may lead to additional payments when work falls ‘out of scope’. Whilst this can be challenging, especially when fees are often higher than retainer-based work, it can provide brands with more flexibility during uncertain times.
Like all businesses, agencies must also balance their income with staff retention and direct their resources correctly. This can be difficult to achieve when working on a project basis. As such, agencies are more likely to move away from full time staff, and opt for agile offshore work to increase margins and to cater for workflow. This type of freelance talent is usually more expensive, so it’s always worth questioning who is actually undertaking the work when creating your scope of work.
How to make sure you’re paying the right price for retainers v project-based work
Communication is crucial when if comes to assessing retainers v project-based work and the best way to approach an agency-brand relationship is to find a happy medium for both parties.
A key starting point from a brand’s perspective is to communicate the type and volume of resources needed. This may be a price based output model, or it could just be building an open dialogue and having the right level of transparency between agency and brand to establish direction and the resources needed through Scope Metrics.
Essentially, proper scoping and commitment to activity levels is the easiest way to achieve the best possible fee/ rate arrangement. It builds a stronger relationship and establishes a way to negotiate from the offset.
Alternatively, brands can bring some certainty over fees per project, allowing projections to be made from the agency side. This way, agencies can plan and gauge the volume of work needed versus the value it is charged at. This gives both sides the ability to strategize and reap the benefits from a more adaptable arrangement.
The greatest certainty, however, comes from knowing what you’re paying for, regardless of whether it is a project or a retainer. This can be achieved by assessing staffing plans based on Agency Hourly Rates, Direct Base Salary, Overhead Cost and FTE Hours. By looking at this data, brands can choose the most suitable model of work and have confidence that they are getting it at a competitively benchmarked market price.
So, whilst it’s a balancing act, the truth is that brands need to carry out pricing due diligence before committing to any type of workflow.