The end of agency retainers

The end of agency retainers

22 July 2020

Why a traditional retainer model doesn’t work

When your company sets out on it’s journey in paid advertising, traditionally you would contact an online advertising agency. You would tell the agency your objectives and monthly marketing budget, with this information the advertising agency would then map out a plan to manage your company’s paid advertising to get the results you desire. On top of your company’s advertising budget the agency would charge you a fixed fee for the management of your account. The fee would normally range from a minimum of £1500 a month or 10 – 15% of the companies advertising spend per month, whichever is higher.

Why doesn’t it work?

The reason this model no longer works is that the agency doesn’t have an invested interest in your company. When the agency doesn’t have a stake in your company or have incentives in place, there is no pressure on the agency to make the campaign work for you.

There are rarely KPIs in place which state if certain goals are achieved the agency will receive a bonus on top of their monthly fee. Equally if a campaign doesn’t perform, fees will are not be deducted. This doesn’t work for your company, it only works for the agency as they pick up their fee regardless every single month.

So in theory an agency could set up your campaign on day one with all the suggested keywords and leave it untouched for the duration of the contract. I am not saying this is the case all the time, as there are many good agencies out there who do work on this model. However it does question, why would a agency only offer to work with the client on this model when there is only one clear winner… and that isn’t your company.

What is the alternative?

The alternative is a cost per lead model, this means that instead of charging a fixed fee every month, your company is only charged for leads you receive. This is the only fee your company will ever pay!

How the model works is the agency (usually know as a lead generator – like us) will provide you with a cost for each lead you will receive for your company. This will have been determined through an audit carried out with the company to ensure that the cost per lead financially works within their business model. When the campaign starts, you will then only pay that fixed lead cost multiplied by the amount of leads supplied.

Where is the risk in this model?

The risk is all on the lead generation agency, as they need to bring the lead in for less than they have quoted your company to make a profit. If the lead costs more money than quoted, the agency simply loses money – not your company.

So, overall you can see the difference between the two models. The main difference being that the agency on the new model carries all the risk and has an invested interest in your company’s campaign performing. If your company’s campaign performs, you order more leads which in turn increases profit for the agency, it’s a win win!

If you would like a free audit for your business, then please don’t hesitate to get in touch.

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