The debate rages on in our industry about whether agencies should have fixed monthly retainers or bill real time of staff for client engagements. With all due respect to PR Week, I think the publication really got it wrong in its latest analysis. And unfortunately, it’s public viewpoint acknowledging that fixed, month to month retainers are the way to go, only serves to hurt our industry by bringing us back to the "Dark Ages." It’s ironic because PR Week is one of the few objective guiding lights whose mission has always been to show the business world just how strategic and important our work is. But, in this instance, the argument conflicts with its mandate. Here’s the article: "Are fixed monthly retainers the best billing option for PR agencies." In full disclosure, you’ll see that the article is actually a debate between my partner Steve Cody and another agency president, Sean Cassidy. Sean strongly advocates monthly retainers. Steve argues against it. And, PR Week wrongly agrees with Sean. For the record, I’m not writing this post to stand behind Steve. As a matter of fact, Steve and I often disagree on many issues within our industry. This has nothing to do with loyalty and everything to do with the fact that I vehemently disagree with Mr. Cassidy (and PR Week). Now, let me explain why. This really all begins by understanding what clients are actually paying for (conceptually). We believe that our clients are compensating us for all the valuable time we devote (strategically, creatively and implementation) to generate results. In essence, our professional staff’s time is our product. Knowing that this is the case, when we tell a client that it will cost $20,000 this month to do all of that to generate the results that we all agreed upon, that isn’t some arbitrary number that was made up out of thin air. It’s truly based on how much time we believe it will take for the team to accomplish the goal. If we follow Sean’s train of thought, then that same $20,000 has nothing to do with the professional time the team will need and has everything to do with a lump sum of money that will support whatever it takes to generate the same said results. This means that if it takes the team $45,000 or $62,000 in time for that month to generate those results, so be it. Because Mr. Cassidy’s view is that it’s all about settling on a fixed amount of fee to be as flexible as possible for the client, the agency could end up losing serious fees every single month because the client has been conditioned to believe that he/she is only paying for results, not for the professional time that is needed to obtain results.
Mr. Cassidy writes, "Utilizing a fixed monthly retainer model creates a natural emphasis on producing results regardless of the time needed to do so, and keeps the paperwork to a minimum." I concur 100 percent with that. And, it will also drive an agency to go bankrupt during serious growth periods. That’s because account staffers can only work on so many pieces of business. So, if there is no focus on how much time they should devote to each account (based on real annual fee budgets), then each will max out his/her productivity very quickly and that means only one thing. More people will need to be hired for each new piece of business, when that shouldn’t really be the case. The net result will ultimately be bad for the client because the agency will not fare well and when that happens, account people get nervous, become stressful and feel a lot of anxiety. This typically leads to dropping balls on accounts or at least losing real focus on the client’s business. So, the indirect effect of this cause is only bad for clients.
Clients might believe that fixed retainers are the way to go. But, that’s because (in most cases), we haven’t educated them as to what is best for both parties. We all should be focused on results. I know we are at Peppercom. But, we also make a point of showing them just how valuable our time is so that they can truly comprehend that successful public relations isn’t just about making a few calls, or having excellent media contacts, but real time spent at many levels to provide optimum value.
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