ABOUT CLIENT & RETAINER AGREEMENTS
You don’t have to look far, or think very hard, to see why a retainer arrangement could be great for an agency. It offers steady and predictable income (for a creative business – who’d have thought it?!) and allows you to build a deeper relationship with your client as you’re guaranteed to be working with them for the duration of the retainer period. If it’s so great, why are your clients, especially the SME ones, not signing on the dotted line?
The core problem that business owners have with retainer agreements is that they typically require them to commit a certain amount of spend each month without any agreed output aside from head hours. Sure, the agreement offers to provide 100 head hours a month to ‘manage the marketing function’ … but what does that mean? What outcomes can the business expect from that spend? What are your promising to deliver?
Business owners like to know exactly what they are getting for their dollar. If they are engaging an agency they will want to know things like:
- What the website will cost, when it’ll be ready and whether it includes all creative (e.g. headshots of staff)
- Whether or not the print campaign includes media or if it’s just creative
- What kind of traffic they can expect from a social media ad spend
- The estimated change in lead conversion after implementing an inbound platform
- What ROI a Google Adword spend is predicted to deliver
If you’re unable to articulate exactly what the business will get, when they’ll get it and what it’ll cost you’re going to have a much harder time getting them to sign the contract than you would if you had a clear and compelling offer.
It’s for these reasons that SME clients have a hard time agreeing to a retainer agreement because they are simply too open-ended, they don’t really understand what they are getting for their investment. If you’re dealing with the owner, it’s their hard-earned cash you’re asking them to spend, not some pre-defined marketing budget for a large organisation. This makes them a tough audience to sell to as they have different motivations for spending (or not spending) the money.
Even if you can get a client to sign, it’s not always roses for the agency that does secure a retainer client. In the words of Mark Manson, we’re often just replacing one problem with another, the question is, is the new problem better or worse than the original problem? We’ve solved for cashflow, but now we have a client that might come to resent paying month-in-month-out regardless of what is actually being delivered. A resentful client isn’t going to stick around or make your team’s life any easier.
What to do? Try pushing for a long term, results driven, contract. For example, you may agree to a $15,000 a month budget for a minimum of 6 months, but instead of that simply buying head hours, establish a clear time line of deliverables for the client. This way they know exactly what they are getting and when, and you’ll have the security of knowing that you’ve got that guaranteed income coming in every month for the next 6 months. Keep them happy and it should be easy to sign them again.
And finally, why bother targeting SME clients if they are so difficult to begin with? There are two great reasons for targeting SME businesses:
- Deliver well and you may have a client for life. Unlike big companies where a new CMO signifies your agency is likely gonna be booted for the new guy’s mate, dealing directly with a business owner gives you a level of influence hard to compete with.
- Spread your risk. Smaller agencies can more effectively spread their business risk across a portfolio of smaller clients than they can with one or two big players. A big one leaves and you’re on struggle street. A SME client leaves and whilst it sucks, no one is getting made redundant.
If you’re interested in discussing pricing strategy for your business why not get in touch so we can have a chat? We’ve worked with countless agency owners over the years to overcome a huge range of business problems and we’d love to help.