Is your marketing agency honest?
Luke Miller, President and COO – Shop Marketing and Creative Group
It is pretty easy for a marketing or advertising agency with a big idea to lure in an amazing new client. Experiential and event (E&E) agencies could not survive without grand ideas. However, these ideas are just like large, shiny diamonds: they blind people who are drawn in by the size, the shimmer, and the grandeur of it. Creativity is the life blood of any agency, so it takes dreamers, innovators, and risk-takers to make a company great. Most large brands do not realize the E&E agency they have hired is likely charging them exorbitant amounts of money to bring those ideas to life and that is just one of the many shady practices these agencies engage in.
After years in the agency world, I could not take it anymore. I could not handle the lies, the blatant exploitation of good talent, the treatment of expendable “low-level” employees, and, most importantly, the arbitrarily large fees, mark-ups, and rates that these agencies charge their clients. These are clients that trust the agency they have hired and wholeheartedly believe them to be doing honest work.
This is a world-wide industry practice. I have not run into an agency that does not do it, yet. I have seen clients billed for 200 hours of Account Director level work, when that project only received 10 hours of Account Director level work. I have seen budgets with meager amounts of Account Executive level work and then watched these 23 year-old kids sleep at the office because they are the only ones working on it. The real craziness comes when you realize how many levels of project management work there are and how ridiculous some of their hourly rates can get.
I have seen agencies that charge over $200 an hour for entry-level work. I have reviewed estimates that are charging over $500 an hour for mid-level work. You do not even want to know what I have seen for top-level rates, but these are the rates where agencies make their money. It is painful when you learn that these employees do not even see a fraction of that rate on their paycheck. So why lie to your clients? Why charge them hourly rates at all? Especially if they are nothing more than thoughtlessly inflated numbers? Why not just charge a fee?
Some agencies do just charge a fee. Seems honest right? A flat fee based on some percentage of cost and that fee equals profit. Great! Every business, especially a service oriented business, should be able to charge a fee, right? I mean after all; we are in business to make money. The problem is not the fee, it is the mark ups that agencies force into their budgets to make their fee grow.
Let’s say your agency charges you a 25% fee for your project. Let’s also say, for simplicity’s sake, that your entire project has a hard cost of $1000. Pretty straight forward, right? The agency makes $250 and your bill is $1250. This is super fair, or so it seems. The thing most companies don’t know is that the $1000 hard cost was probably actually only $800 and the agency marked it up. It’s pretty easy to see why they marked it up, right? If they billed you the honest hard cost they would have only made $200, but with a little white lie they now made $250 and you are none the wiser.
Why is this a normal industry practice? I don’t know, but I did set out to change it. It’s why I started The Shop and it’s why we do things different.
At The Shop, we make it a point to be transparent and honest. We took these deceptive billing practices and we got rid of them. So what’s different? A lot:
We choose not to hide our profit from a project. You hired us to do a job, so you probably understand that we intend to gain some profit from it – why hide it?
We choose to make the estimate process more accountable. We do extensive research to ensure our final estimate is accurate. We build in a 20% contingency (not a mark up) to account for variability, but here is the kicker: if we overestimate you get the difference back, if we underestimate we eat the difference. We claim to be experts in what we are doing, so it is on us to get it right from the start. Why punish you for our error?
We choose to charge a combination of both hourly rates and agency fee. We do this in the name of transparency, because it make it harder to hide costs.
We choose to charge an agency fee based on a sliding scale of total hard costs. This roughly translates to a volume discount. The bigger the project, the smaller the fee.
We choose to charge reasonable, accurate hourly rates and those rates are what we actually pay the employees who are working on the project.
We choose to charge hourly rates in ranges, instead of exact figures. We do this because there is no way an agency can accurately tell you exactly how many hours it will take to finish a project. We bill in ranges, because we operate with a ‘get it done’ mentality. It may fall in the low end of the range or it may fall in the high end, but what matters is we get it done. Any agency that tries to tell you the exact number of hours a project will take is lying and lying is something we don’t do.
Deception isn’t good business and it was the driving force behind starting Shop Marketing and Creative Group. We truly think we have the most honest estimate and billing process possible. We challenge you to audit your next E&E project, whether it is with us or another agency, because if an agency is hiding something, an audit will always reveal that. We have nothing to hide and we think that’s how a business should be run. We hope you do too.
For a detailed breakdown of our rates and fees, Luke@ShopMKTG.com is a great place to start.