5 Mistakes Creative Agencies Make When Managing Retainers
Read time: 11 minutes
Retainers tend to be an attractive option for both creative agencies and clients. With a retainer, the client knows their monthly expense will be consistent, and the agency knows they will have a steady stream of revenue coming in. However, retainers can be dangerous to the creative agency if they aren’t managed correctly.
For those of you who don’t know how a creative agency retainer truly works, it’s an arrangement between a client and an agency to collaborate over a long period of time at a fixed rate on multiple projects. If a customer has specific objectives in mind or is willing to discuss them with their agency, a retainer gives them access to the agency resources at consistently lower prices than usual. With retainers, you can scope out the work together with the client, develop an execution plan, decide what work is included (and what isn’t), and discuss how the work will be controlled.
Where there is a regular need for a variety of support services from an agency, retainers work best because they enable both parties to cut down on administrative work and increase productive time. They enable customers to work with a passionate team of professionals who are committed to delivering excellent work at a competitive price.
Retainers are a great method for agencies to enhance their offerings, grant their clients more creative flexibility, and enhance client relations. While marketing agency retainers can be advantageous for both parties, managing retainers can also be challenging.
Here are a few common mistakes that many creative and advertising agencies make with retainers.
1. Not Really a Creative Agency Retainer
Here’s something that I come across surprisingly often. A creative agency has a monthly “retainer” with a client, say for $10,000. This retainer includes 100 hours of work per month.
However, if the agency spends less than 100 hours at the end of the month, the client demands that they adjust the bill based on the number of hours actually worked. If they only worked 80 hours, they would only charge $8000. However, if they go well, that’s just part of the deal. This may sound crazy, but it’s pretty common. This is a prime illustration of a client intimidating an agency.
When establishing a creative agency retainer, set a trial period of six months. In your retainer agreement, state that during that period, if the client overuses the retainer by 15% or less, you will let it slide. If they overuse the retainer by over 15%, you will charge them based on your blended rate for each hour above the 15% overuse. If they underuse the retainer during the trial period, offer to repay them via an hourly credit of 20% of the unused monthly hours for 5 months.
This trial period will allow you to understand your clients’ needs better while helping to avoid being caught in a pattern of an overused retainer. The key to this being successful is accurate tracking, reporting, and transparency. That leads me to my next error.
Here’s How to Avoid Being Bullied By Your Client
When establishing a creative agency retainer, set a trial period of 6 months. In your retainer agreement, state that during that period, if the client overuses the retainer by 15% or less, you will let it slide. If they overuse the retainer by over 15%, you will charge them based on your blended rate for each hour above the 15% overuse. If they underuse the retainer during the trial period, offer to repay them via hours credit of 20% of the unused hours per month for 5 months.
This trial period will allow you to better understand your client’s needs while helping to avoid being caught in a pattern of an overused retainer. The key to this being successful is accurate tracking, reporting, and transparency. That brings me to the next mistake.
2. You’re Not Tracking Very Accurately, Are You?
Every single hour needs to be meticulously tracked when it comes to a marketing agency retainer. Writing it down and entering it into your project management software later will not cut it. You must track your time in your agency management software as you work!
As you probably already know, the client will want to see a detailed monthly report of precisely what they got for their digital marketing monthly retainer with your advertising agency. You can’t be scrambling at the end of the month to enter all of your time. It doesn’t matter how well you’ve organized those cocktail napkins; your time tracking won’t be accurate. Track everything in your agency project management software daily and send a detailed report to your client of all time spent during the month, along with the creative retainer invoice.
Remember that agency retainers are billed in advance. The time report is for all work done in the previous month, while the invoice is for the next month.
Project Management Software Time Tracking
You can’t be afraid of the truth here. If you’ve gone way over but intend to ignore the above advice and eat that cost, you better ensure the client is aware of it. On the other hand, if you’ve gone way under, you want the client to be made aware of that as well.
Why? Having a client not taking full advantage of their retainer with you can be more dangerous than a client who demands more than what they pay. If you’re consistently coming in under budget, it’s only a matter of time before your client decides their retainer with your creative agency isn’t worth it.
3. Poor Work Management for Retainers
How are the tasks of creative agency retainers managed by your team? Most agencies would go for a cumbersome combination of spreadsheets, collaboration, and job management tools. This method usually has the same outcome: poor communication, haphazard planning, and continuous project derailment.
Managing the retainers’ scope and timeline is essential to your agency. Your ability to complete tasks on schedule and within budget will impact your profit margin, your capacity to attract new business, and your reputation.
The following are some of the most typical marketing agency retainer management errors in agencies:
- Not using a tried-and-true management methodology
- Relying on auto tools rather than tools with a goal
- Working in silos rather than encouraging cooperation between them.
Once you correct these errors, you’ll discover that your creative agency retainers practically run themselves. Communication issues typically disappear. With established procedures, you can expand and bring on new creative agency retainers without worrying about how they will be managed.
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4. Unoptimized Retainer Procedures
When you integrate new marketing agency retainers into your workflow, make sure to share crucial information at this time to facilitate operations and avoid bottlenecks. This is also known as the client onboarding process. It can be a straightforward welcome and a meeting with the client or a complicated setup process that lasts a whole month.
Client onboarding should include key milestones to track progress and clarify “when onboarding ends.” Depending on how you interact with your client and the service or product you’re providing, that will take different forms. Longer, more involved onboarding processes may be necessary for more complicated services and problems.
A successful marketing agency retainer onboarding procedure provides you with all the necessary information to manage your retainers. It also helps develop a strong relationship with clients, showcase your professionalism, and set the stone for future successful contracts.
Using an agency management tool like Function Point is an excellent way to improve retainer procedures. From client onboarding to managing feedback and the work progress, your entire agency is brought under a dashboard with Function Point. Sales may learn from project teams to increase deal flow for retainers, and finance receives accurate figures directly from sales.
5. Misaligned Expectations
Agency retainers can fail due to misaligned expectations with the client. This can happen for various reasons, such as the client demanding more work than what was specified in the contract or the agency thinking they can put in as many hours as they like and still get paid. Both sides need to be open and honest in their communication and expectations for creative agency retainers to be a successful business approach. It is crucial to agree on what is expected in the beginning to avoid surprises later on.
6. Unsupportive culture
It’s always surprising how little attention agencies give to culture, considering that their success is majorly dependent on the calibre of their talents. Agency culture is vital to lure top talent. Money alone won’t always be enough to entice the finest workers. Especially when your personnel is the one directly interfacing with clients during project execution.
Here’re some cultural problems you can encounter when dealing with retainers:
- An agency prioritizing speed and quantity can lose quality for the retainer deliverables.
- If an agency culture doesn’t encourage communication transparency, it can lead to miscommunication between teams and clients when doing retainer work.
- If an agency doesn’t promote a learning culture and update new trends and technology, it cannot boost innovation, and it is hard to provide the best service retainers for clients.
That’s Not All You’re Doing For Them, Is It?
Retainers have pros and cons. The customer and the agency benefit from a more straightforward planning process for the client’s marketing budget. The consistency is excellent, but the potential for mistreatment is high. Furthermore, as many creative and marketing agencies discovered, retainers are often the first cut in a downturn.
While it may be sensible and valuable to the client, it quickly catches the eye of whoever makes some cuts. Having a retainer as the only type of work you do for a client is risky for your ad agency, especially if that retainer is a large one that makes up a hefty portion of your agency’s revenue.
To protect themselves, agencies would be wise to implement some measures. Try to have a pre-defined set of guidelines for what will and will not be included in the agency retainer agreement. Supplementing the retainer with other pieces of work charged at a fixed rate or, better yet, time or materials for the same client will lower your risk. This will also allow you to compare the profitability of retainer work to other types of work for the same client. Remember, when working with agency retainers:
1. Get everything down on paper
Be sure to obtain a copy of the contract and any other pertinent paperwork, such as the list of tasks or charge schedule. This will assist in preventing any confusion regarding the conditions of your contract.
2. Make your goals obvious
It is best if you can be very precise about your goals. The project objectives should be clearly outlined in the project outlines. Don’t hesitate to offer each other helpful advice so you can make any necessary course corrections.
3. Utilize time-tracking software
As a service provider, be sure to keep track of your time so you can accurately bill the client. The agency’s budget will be helped by time tracking, and you’ll be paid for all of your labour.
Retainers are typically considered a cost-saving strategy for clients. This is particularly true in the current business climate, where few businesses can afford to staff their marketing teams with the complete range of specialists that today’s multi-channel world requires.
Retainers can be a fantastic way to guarantee clients have a trustworthy, knowledgeable partner to help achieve their goals—often for a little less money, provided they have a good contract. For agencies, obtaining an agency retainer agreement can reduce the amount of time spent pitching for work and guarantee a steady revenue stream. Everybody benefits, just remember to pay attention to the 5 mistakes you can make when applying creative agency retainers and develop a risk management strategy.
Project management software like Function Point is an excellent way of keeping on top of your time tracking and all your tasks and client work. To learn more, check out our blog on 3 reasons and 3 tips for creative agency time tracking. Want to see what Function Point can do for you? Get in touch today.