At the end of the day, what matters in the advertising agency isn’t glamour versus grindstone; it’s the output–the ability to further the clients we serve. Large agencies have the flash; small agencies have the focus. Here are some quick insights to how agencies justify and develop cost.
Not all of us play pool at the office.
Hollywood glamorizes this industry more than most. With Emmy Award winning shows like Madmen, it’s easy to get lost in the portrayed lifestyle. All those hours “creating” get billed. I’m not saying creatives, like me, don’t need time to develop inspired and innovative work, but there’s a hefty fee if you want your creative staff to spend four hours developing the perfect headline. On the other hand, being so budget conscious to the point where you get a half hour to create, write and design an ad can be detrimental to its success. The key is to find an agency that maintains a balance between concept and output.
The real cost when everyone puts in their two cents.
A big selling point for larger agencies versus smaller agencies like mine involves the hourly rate. In the Fargo-Moorhead market, a small agency may charge a higher hourly rate as opposed to the large local and Minneapolis agencies. However, the final bill of the large agency will most likely be much higher. Why? The large agencies tend to shower clients with more billable employees than small agencies.
Small agencies generally include one to three of these people in meetings:
Marketing Advisor
The Creative Director
Interactive Director
Large agencies may have the following:
Account Executive
Assistant Account Manager
Creative Director
Assistant Creative Director
Project Manager
Media Buyer
Interactive Director
Here’s a scenario of how billings work for a multi-media marketing campaign meeting. Assuming the meeting lasts only an hour here’s how much it would cost:
Small agency: 3 people $120 / hour = $360
Large Agency: 7 people $80 / hour = $560
At this point, you probably understand a large agency costs more for its expertise and variety of experts, but can you justify, accept and swallow the difference in price? The last example used an even amount of time, one hour. Assume everyone in the meeting speaks for a half hour. Here’s a more accurate scope of what a meeting would cost.
Small agency: 3 people, 1/2 hour each, at $120 an hour
total meeting time = 1.5 hours (3×1.5 x $120) = $540
Large agency: 7 people, 1/2 hour each, at $80 an hour
total meeting time = 3.5 hours x 7 x $80/hour) = $1960
That’s a difference of $1420. For a small agency, that’s nearly 12 hours of work.
These rates carry over into other production aspects. For example, we may send one representative to a commercial shoot, either the writer or the account executive. Larger agencies will usually send the account executive, creative director and possibly a designer, production manager and copywriter.
I’m not ragging on large agencies. Let’s be clear. Large agencies, especially in more expensive mediums, like television, produce nice quality deliverables. With clients that are willing to pay the high cost, they generally have the budget to use high-end production companies. And the Fargo-Moorhead area does have some really talented vendors for those who can afford top-end stuff.
A phone call could save you 15% (or cost you a whole lot more).
Agencies are a hybrid between a law firm and an electrician. Consultation versus output. Know where the bulk of the billing goes. Does it go into talk (consultation) or action (multi-media campaign execution)? Talk isn’t cheap. Small agencies usually bill more on the action side because campaign deliverables get new customers, meetings don’t.
Choose.
He or she who gets the last laugh was first after the last lap. Glitter is great, gusto is better. Find an agency that has the latter. Make the decision that’s right for your business. Compare. Look for ingenuities, inspired if it comes to a matter of expense, look beyond the hourly rates. If I’ve shed some light on the consulting costs, stop in and we’ll talk – for free.