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Brands engaging with agencies need to ensure they are paying fair global agency rates and building agency relationships based on trust and transparency.
The current market is complicated. The cost of living, the economy, geopolitical instability are all factors driving up expenses and putting companies on a financial edge. Prices for everything are increasing to keep up with inflation and expenses – and agencies are no exception.
However, this means that now, more than ever, there is a greater need for transparency and clarity from your agency.
Over the past 12 months, we’ve heard from clients of their agencies:
- increasing rates due to the cost of living, employee wage and running costs; in one instance, this was as much as 30%.
- employing staff in cheaper markets but not passing that cost back to the client.
- using AI to do some of the work but not passing any cost savings back to the client.
It’s essential for agency relationships to be built on a solid foundation of trust and transparency — two key fundamentals for successful collaboration. And part of this transparency is about understanding the principles of how your rates are calculated.
There is a balance. You want your agency to be producing the best work possible. Which means they need to be making a profit. The key to that balance is understanding the details to enable informed decision-making based on the facts.
Global Agency Rates: The Cost Problem
A recent analysis of the market by AdAge hit the nail on the head when it described how brands and agencies are ‘increasingly clashing over the transparency of fees and services as they navigate the shaky economy and procurement scrutinises every marketing dollar spent.’
Every part of the marketing supply chain is connected, and everyone is fighting for that dollar.
- Marketing teams are pressured to prove their value, deliver growth, and produce positive results while retaining their budgets.
- Finance is scrutinising expenditure to keep the company as lean and efficient as possible.
- Procurement is under pressure to ensure that costs are tightly managed, while fending off the demands from a Marketing team that has to perform results, often with less.
- Agencies are trying to retain talent and market share while balancing their own costs.
- AI adds complexity to the equation as agencies and brands navigate the radical change this introduces to content, service delivery and capabilities.
It’s easy to see how quickly the situation can devolve with every side out to protect their corner.
Global Agency Rates: Looking at the Problem
In reality, brands just want agency partners who can help them deliver results.
Sounds simple.
But, the rub often comes when no detail is provided about the costs. Understanding how the agency will deliver the results and what that costs is vital.
Marketing Procurement’s challenge is building the bridge between agency and brand, which allows for shared value and growth without compromising on costs and deliverables on both sides.
It’s important to stress it’s not always about expecting more for less. It’s not about stripping all the meat from the bone. As we’ve said, you want your agencies to be making a profit.
So what’s the answer?
Global Agency Rates: Transparency & Benchmarking
At a time when every company is working hard to stay in business and grow, it stands to reason the need to focus on costs and ROI to ensure spend is working hard.
Transparency is the fastest and most efficient way for agencies and brands to turn this dynamic away from combative and complex towards the common ground of shared growth and collaboration.
Part of this transparency is to compare agency costs against industry benchmarks to see if there is room for opportunity.
Transparency means:
- Fully understanding agency costs across spend, media requirements, profit margins, employee salaries (and their location), and overheads to see how these map back to your agreements.
- Shared knowledge and understanding so both brand and agency can spend intelligently, recognise the value on both sides of the equation, and collaborate towards shared success.
- Stronger relationships built on a foundation of trust that furthers innovation, creativity and growth.
- Cost savings – ironically, transparency will improve cost savings on both sides thanks to streamlined processes, targeted spend, improved benchmarking, and refined strategic planning.
The emphasis should be on the value of transparency.
Achieving Transparency with ease
You want to start by asking your agency questions. The right questions ensure your spend on global agencies aligns with realistic costs and expectations.
But transparency is a two-way street; your agency needs to ask you questions to clearly understand your expectations and the metrics you will use to measure success.
If you start from a place of shared information, you remove the risks of misunderstanding and take emotion out of the agency cost discussion. This is the start of building trusted relationships. Moving the needle away from feeling the brand-agency dynamic is a battleground and is a supportive relationship founded on clarity and shared objectives.
Cost is, of course, the primary concern here. RightSpend helps overcome this problem by allowing you to benchmark and track marketing costs with data and insights that drive transparency throughout.
We provide you with accurate and up-to-date benchmarking data across 75 global markets, so you can assess costs and expenditure to ensure your marketing budget is allocated as wisely as possible. You can apply this benchmarking to campaigns across multiple countries and gain region-specific insights that provide transparency in all agency engagements.
RightSpend’s benchmarking solution leverages intelligent technology and data to give you the transparency you need to transform the agency dynamic and build long-lasting relationships to help everyone thrive.