How do agencies price their services and what are you paying for?
Working in an industry where deliverables are not physical objects makes it difficult to explain the costs linked to the services we deliver to our clients. So, what exactly do you pay for when you hire an agency? And how do we, as agency, put a price tag on our services?
Well, actually it is extremely easy: it all comes down to people. And guess what? Nobody works for free and…. good people cost money!
The pricing model of creative agencies is based on man hours for a very simple reason: the quality of their creative brains is literally what makes their success.
Without good resources, agencies cannot perform – therefore salaries represent the big bulk of their cost, and the time that resources spend on project is their cost of production as all the campaigns, designs and ideas are the pure result of the time that their brains have spent working on the project.
The Value of Time – An Asian Taboo
The model based on man hours is extremely complicated to put in place in this part of the world as the mere concept of man hours goes against Asian’s cultural perception. Here, time is cyclic, it knows no beginning and no end; and as a consequence has no value. It is a perception that clashes with western linear time model where the time spent on something is time you will never get back to do something else.
A very obvious representation of this issue can be found in mechanical shops. I had once a woman in a bike shop change my bicycle inner tube. She spent 40 minutes doing this. The price? The same as if I had bought the inner tube off the shelf and done the whole thing myself. Unfortunately, the expectation that time is worthless is a problem polluting all service industries in Asia.
As a consequence, agencies find themselves packaging their services with man hours hidden behind specific “items” like advertising creation, website development, logo creation, etc. They are not explaining in details the final result, but the amount of time each resource will spend on the project. Still, by hiding this concept of man hours, it becomes increasingly difficult to justify or explain price discrepancies between agencies and/or freelancers.
So why buy a service from an agency when you can simply hire another freelancer or do it in-house?
Creation, or Helping You Know What You Want
Working in-house or with a freelancer might be a good option if you are looking at pure execution work. However, from our experience, brands seldom know what they want before they see it.
Brand teams will often be extremely sharp when it comes to defining the product, the target group, the market and the campaign objective – but figuring out how to express or visualise the idea is often more…. complicated. That, is where agencies come into play as they will take in all the materials available, the inspiration, the likes and dislikes, and analyse it to create something new, unique and powerful for your brand based on the objectives you have set. That’s what hiring an agency means: hiring a pool of talents ranging from brand experts and project managers, to creative directors and copywriters, to push the boundaries and produce comprehensive proposals to enhance your brand.
We are talking about a whole process involving the time to brief the team internally, the time for the Creative Director and/or Brand Planner to decide on strategies and design directions, the time for designers to bring these directions to life, and the time for the account team to research and to ensure everything is on brand before it reaches your meeting room for a presentation.
When you hire an agency, it means paying for the time that these talents will spend to analyse and visualise the concept and to do what a single in-house talent or specialised freelancer cannot possibly achieve.
Adaptation – Just A Little Change…
Not all projects are full creation – some are simple adaptations of content to new formats, some are adaptation of brands to new concepts, some are simple rounds of changes. Depending on the brief received, the evaluation of the time and types of resources necessary to “crack” the brief will influence the price set on the services.
And sometimes, despite looking like little changes, a “little” change can often represent more work than what meet the eyes. Changing a colour for example can sometimes influence the entire concept and will eventually result in drastic changes to the entire project and its collaterals.
The price tag agencies put on their services is strictly correlated to the time brains are working on your project(s). The better the brains, the more expensive it costs. In agencies, you will find specialists in creation and new-thinking but also specialists in industry standards for translation, formats and marketing regulations. Working with an agency ensures your campaign, poster or brochure will be unique and true to your brand, and it will be according to industry standards and regulations.
Now is that worth our time and budget?
“If you think that good design is expensive, you should look at the cost of bad design.” – Dr Ralf Speth (CEO, Jaguar)