iMedia Connection: The Price Clients Pay for Interactive
iMedia Connection: The Price Clients Pay for Interactive
Gerry McGoldrick writes in this article that interactive agencies have to (or should) charge by the hour as opposed to traditional agencies who charge a commission. I don't know Gerry, but with all due respect, neither are correct.
Gerry is frustrated by clients who want to compare one fee structure to the other, but it appears he refutes the argument by continuing the comparison. One can't win a debate about incomparable ideologies by then comparing them.
If you've ever hired someone by the hour you know the first concern that comes to mind. Will they complete the job as quickly as possible or stretch it out a little to bill the hours? If invoices make a client tense, the client will find someone else to invoice them. And commission, how irrelevant! It doesn't take double the effort, knowledge or resources to buy $2mm worth of TV that buying $1mm worth of TV does. Haven't clients figured this out?
Years ago I asked a small agency to give me a full estimate (including their fee) to produce a 20,000 piece direct mail. I then plugged in estimated response rates, buy rates and came out with an (unfavorable) ROI. I told them I couldn't justify their fee because the ROI wasn't working out. Their response? "We didn't know our fee was part of the ROI equation." Why wouldn't it be? That money doesn't come from a separate non-measured source!
In the end, ROI is the only thing that matters to a client. At Goodway 2.0 (and the great folks at Goodway Group) we price to ROI - period. Sure we figure our time, resources and hard costs in there. The trick is, if all of that is added up and we can't make the ROI work, we don't take the project. Additionally, this tactic takes all the focus away from our fees and puts it on the value of the ideas, execution, and overall campaign. When one side wins, we all win. After all, that's when it's the most fun.
Gerry McGoldrick writes in this article that interactive agencies have to (or should) charge by the hour as opposed to traditional agencies who charge a commission. I don't know Gerry, but with all due respect, neither are correct.
Gerry is frustrated by clients who want to compare one fee structure to the other, but it appears he refutes the argument by continuing the comparison. One can't win a debate about incomparable ideologies by then comparing them.
If you've ever hired someone by the hour you know the first concern that comes to mind. Will they complete the job as quickly as possible or stretch it out a little to bill the hours? If invoices make a client tense, the client will find someone else to invoice them. And commission, how irrelevant! It doesn't take double the effort, knowledge or resources to buy $2mm worth of TV that buying $1mm worth of TV does. Haven't clients figured this out?
Years ago I asked a small agency to give me a full estimate (including their fee) to produce a 20,000 piece direct mail. I then plugged in estimated response rates, buy rates and came out with an (unfavorable) ROI. I told them I couldn't justify their fee because the ROI wasn't working out. Their response? "We didn't know our fee was part of the ROI equation." Why wouldn't it be? That money doesn't come from a separate non-measured source!
In the end, ROI is the only thing that matters to a client. At Goodway 2.0 (and the great folks at Goodway Group) we price to ROI - period. Sure we figure our time, resources and hard costs in there. The trick is, if all of that is added up and we can't make the ROI work, we don't take the project. Additionally, this tactic takes all the focus away from our fees and puts it on the value of the ideas, execution, and overall campaign. When one side wins, we all win. After all, that's when it's the most fun.
posted by Jay Friedman - Goodway 2.0 @ 9:41 PM
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