Drop The Retainer If You Want to Retain

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The day of the large retainer fee is over. Upfront and ongoing fees charged by PR, advertising and marketing agencies used to be the normal way to conduct business, but this is no longer the case. Truth be told, it hasn’t been the case for a while and more agencies need to realize this.

The massive stock crash and financial mire the economy finds itself in has affected everyone, from huge corporations to micro-businesses and everyone in-between. This has resulted in many companies either reigning in their agency spend or cutting ties altogether. The main reason for this has been the exorbitant retainer fees charged by many.

Smart agencies stopped this practice a long time ago, and changed over to value-based pricing. Instead of expensive monthly retainers and high hourly rates, value-based pricing charges on delivered results. This could be number of new customers, amount of new revenue, amount of press received, etc.

The benefit to the client is obvious – they aren’t shelling out for a monthly cost that may return very little. They also know that their agency is working properly for them – no results, no huge project fee regardless of success.

Many agencies decry value-based pricing, saying that it isn’t manageable and there are too many variants to take into account. I disagree – this is where getting to know your client comes in. You know, the role you’re being paid for?

As more businesses realize that high-cost retainers are becoming a thing of the past, the more they’ll look for agencies offering value-based alternatives. Will your agency be one?

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  1. says

    I agree – if anything, I think it encourages many agencies to be lazy, knowing that they’ve been paid regardless. The ones that disagree the most about value-based pricing are usually the ones that aren’t servicing the client’s needs properly.

    If an agency can do their job properly and work with a client towards realistic results, why so apathetic when it comes to working without retainers?

    Thanks for stopping and and glad you enjoyed the post, Richard.

  2. says

    Most clients prefer to pay for “outcomes,” not “outputs.” The old model of retainers still works for those clients that prefer a level-payment plan, but we’re finding that value still drives client satisfaction with results. Keep up the great work!

  3. says

    Thanks Eric.

    There are some clients that prefer the old style retainer fee, but I feel that as they become aware of the alternatives we’re going to see less and less of this practice.

    Just checked out your site – I like your ethics and message.

  4. says

    Danny, what role, if any, do you think social media has in this?

    Isn’t it possible for smaller companies to do their own PR work using Twitter, Facebook, and other Internet services, rather than pay a PR firm to do the work for them?

    I’ve been approached by a couple companies recently who pitched their own press releases and arranged interviews with their own executives — I’m honestly not used to having a company randomly contact me without working with them in the past.

    Michael Hatamoto´s last blog post..HDTV prices to remain low

  5. says

    Hi Michael,

    I think it’s imperative for any small business to promote themselves – using social media is a key part of this (and something I try to help my clients with as much as possible, small and large).

    Where the need for a PR firm comes in would be the extra reach and expertise that they can offer – contacts in the media, press release formatting, distribution channels, prepping clients for media interviews, etc. There’s a lot of work goes on behind-the-scenes in PR that most people don’t realize, including PR interns and students.

    The ideal solution is to become familiar and comfortable with social media, what tools are most suitable for your business niche, and then utilize some form of value-based pricing PR service to really push your news out into the mainstream. The budget doesn’t need to be high, either – it’ll be less expensive than a traditional PR campaign and potentially much more impacting.

    Good question, and thanks for stopping by.

  6. Eyal Rofe says

    Hi Danny

    What, in your opinion, will be the the value based pricing of a social media strategist?

    Nice to read you

    Eyal

  7. says

    Hi Eyal,

    Much of it will come down to current pricing structure versus realistic pricing structure. Many agencies overcharge their clients for their services (although this is true in any business).

    What’s needed is to see the value of what you, as the agency, bring to the client, both financially and brand-wise. This is where getting to know your client comes in – you (should) want the best for them and they’ll be more appreciative of your commitment.

    It may be an agreed fee on returns (monetary, traffic, sales) with incentive-based additions for above-average results, for example. At the end of the day, the agency needs to be realistic and charge for the service offered and not just the “reputation” of the agency and past results. The past is great for what you have done, but the present and future results are where you’re judged now.

    Thanks for stopping by, appreciate your question.

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