The death of the retainer

What does this mean?

The decline of retainer contracts has a serious impact upon agencies. Without a steady income stream (i.e. retainers), agencies are unable to effectively plan ahead, resulting in a knock-on effect on output and delivery.

Why?

1. With no steady income stream, agencies have to keep overheads as low as possible - this may force agencies to minimise permanent staff or hire less experienced teams.
   
2. Agencies have to be more efficient (use less time) but increase output - this may affect planning, out-of-the-box creative thinking, and overall quality of creative solutions.
   
3. In order to secure income streams on projects, agencies may be forced to undercut costs in order secure business, with the hope that a few successes will lead to a longer term relationship i.e. retainer.
   

Result?

• Agencies are under extreme pressure to produce work faster with fewer resources for less remuneration.
  
• Clients receive a quick fix and not necessarily the right fix.

If the lack of retainers can negatively affect creative quality and output, which in turn negatively affects the results of the campaigns, why are clients shying away from retainers?

One cannot deny that the economic crunch is affecting us all.

1. With decreasing budgets and increased pressure on the bottom line, clients are forced to squeeze the agency for as much as possible while paying less.
   
2. With so much uncertainty around financial security, clients are reluctant to sign contracts that tie them to monthly payments for 12 months or more.
   
3. With more and more agencies to choose from, clients are able to use this competition to get more for less.

Where does this leave agencies?

• I believe we will all need to re-evaluate our remuneration structures and move towards structures that reward creative ideas that positively affect client's business.
  
• We need to stop thinking about hours and recognise that the magic does not happen in one or two hours; sometimes an idea is born over coffee on the weekend, sometimes the solution comes in half an hour - does this make the solution any less valuable than the one that took four weeks?
  
• We will need to work together as an industry to stop undercutting each other as this only undervalues the work that we do. If we do not respect the value of our work, then neither will clients. Simple.

Clients need to:

• Recognise that the cheapest, quickest, easiest option is not necessarily going to change your business for the better.
  
• Understand that a campaign with very little results is not worth doing.
  
• Take the extra time, put in the extra effort and approve a campaign that is researched, grounded in strategy and consumer insights, and pushes the boundary (this is the only way to make an impact in this oversaturated world we live in).
  
• Be brave - the only way to make a significant difference to your bottom line is to do something unexpected; the same old is not going to do anything, otherwise you wouldn't be briefing an agency in the first place.
  
• Accept that you pay for what you get - compromise on remuneration and you compromise on the output.

With the changing landscape in terms of financial structures, consumer needs and communication channels, our industry will have to accept that the structures that worked previously can no longer sustain us or the brands we service.

What I would like to see:

• The industry banding together and collectively developing appropriate costing structures that reward intelligent and effective marketing that improves bottom lines.
  
• Clients truly partnering with their agencies. Your agency should be your business partner - only from this vantage point will agencies truly be able to offer you solutions that will positively affect your bottom line.

See also:

• Bizcommunity: Brave is the new safe by Mike Abel
  
• Bizcommunity: The best advice I've ever received by Charl Thom