WHAT DOES IT COST?
by Tom Rankin, APR
One of my former bosses used to say that if a client wanted to talk about billing, we should change the subject. "Money," he said, "is the last thing you should talk about with a client. Put it off as long as possible." I thought this rather cynical at the time, and still do, but the years since have taught me that this view is not totally unfounded.
Money, perhaps even more than politics or religion, can turn allies into adversaries. And nothing in a client/agency relationship destroys trust quicker.
Still, budgets and programs do have to be planned, and wanting to know what something costs is not an unreasonable question. The problem, from the agency side, is that it is not an easy question, and the more you understand what makes it difficult, the better you'll be able to develop that budget or choose between competing suppliers. Here are some key things to consider when it comes to cost:
There is really no such thing as fixed pricing. Manufacturers routinely add up all the component costs for their products, plug in their margins, determine their break-evens, and go to market. They still face possible losses, of course, but the pieces of the puzzle are largely quantifiable and controllable. Not so with an ad, an article or a brochure. These are not commodity items, and other than out-sourced elements like printing, many of the cost-determining factors are neither quantifiable nor controllable. How long will it take to come up with a good headline? How many people will have to review the brochure copy on the client side and add their two-cents worth? How many versions will we have to go through? Will we have to fly to Texas to get the input or the photos? Once an agency has been working with a client for a period of time, these things tend to fall into predictable patterns. Costs are even more predictable after project specifics (such as how we get the input) have been defined. But going in cold, the only way an agency can quote fixed pricing is to make sure every contingency is covered. This is not the kind of pricing you should want to pay.
Creative service firms don't sell things: they sell time. Because most of what we do falls into the category of custom, and because most of our capital equipment goes home at the end of the day, the only financial model that makes sense for the creative services business is one based on time. We may not know how many hours a particular piece will take, but we can determine how much we need to charge for each of those hours in order to stay in business and make a reasonable profit. By the same token, while it may be difficult to predict the cost of a specific project, it is not as difficult to stay within the framework of an overall budget: we just need to control the level of effort expended over time.
So, one way to compare different firms is to compare their hourly rates. But this, too, can be risky. Who's doing the work, what are they going to do, and how good are they? I once heard that Edward Bernays--the recently deceased "Father of PR" who worked until he was well into his nineties--charged $1,000 per hour. That may seem high until you consider that he could probably call the head of any major corporation, even the President of the United States, and get a prompt return. High rates can sometimes be a real bargain when a single call–or a great ad headline or article placement–can generate millions in sales.
Talent and experience are worth more than money. After more than twenty years writing technical marketing copy, I'm (hopefully) faster and better than some of the people who work for me. I also charge more. But the big value-added that justifies my rate is not how fast I write copy, but how well I counsel clients on the strategic aspects of their programs. You can waste a lot of money having the right people doing the wrong things. So you need to look at the whole picture. If you're hiring an Ed Bernays, make sure 1) that you need to call Fortune 500 CEOs, or the President and 2) that he doesn't write your news release copy.
You have nearly as much to do with costs as the agency. We have a current client for whom we estimated a $10,000 budget to edit and place a series of five articles. This was predicated on the client providing rough drafts, but the scientist we were working with turned out to be such a good writer (I hate this part) that the entire series cost well under half that figure. At the other end of the spectrum is a client who is such a "change-aholic" that he nearly doubles the price of everything we do for him. He can't leave anything alone: even the changes he made the day before.
When comparing apples, look at the apples. The bottom line is that a cost-based comparison of PR and MarCom services is the absolute worst way to go. Marketing communications is a major strategic function, and you need to have a partner who understands your business, your technology, your marketplace, and above all, one who can work with you. You need one with talent and ideas, and one who can implement them within the framework of the budgets you have available. Look at the numbers, sure, and make sure they are not comparatively outrageous, but look more closely at the people and their track record. Tell them where you are and where you need to go, and then make your decision based on the ideas they bring to the table. Then, if the ideas are good and the fit is right, let them help you make the numbers work.
The secret is true value. The best advice I got regarding pricing was from a client, since retired, who was probably the sharpest, and nicest guy I ever worked for. He said, "I want to make sure my agency makes a good profit on my business." Why? "Because I want to be as important to them as they are to me."
How to Cut Your Budget and Improve Results
How to Make an Apples to Apples Comparison of PR and MarCom Services.