The agency space is constantly evolving into more diverse and complex agency operating models and more numerous remuneration approaches. As such, marketers have various models available to them when searching for a best-fit agency partner.
The best model will be different for each marketer, and often marketers create a mix of multiple models in order to most effectively reach their goals. The three main dominant types include:
- The Retained Agency Model
- The Bench Model
- The Single Client Team Model
Within these three groups, overlap and blending exist based on what works most ideally for each client. There are always multiple considerations to take into account when choosing which model works best for you and your team including budget, the job to be done, and the level of outsourcing required to produce desired results.
Below, you will find the positive and negative aspects associated with each model, and the most effective ways for you and your team to navigate a rapidly changing industry. Determine which model is best for you and your brand:
In terms of remuneration models, marketers are increasingly developing their own blended approaches. The ultimate goal for clients is to discover the most effective way to best engage their agencies to work more effectively so they can make budgets go further.
The different approaches to reward and incentivize agencies can vary but are typically around inputs, outputs, and outcomes with the opportunity for marketers to develop a singular or blended approach with all 3.
- Inputs- Retainer relationships and fees, time or hourly rate, rate card items
- Outputs- Produced work, project work, and fees
- Outcomes- Performance, project completion, commissions
According to studies, the majority of companies believe that a different approach to the way they pay their agency partners will improve the client-agency relationship. 71% said that changing the current agency remuneration models would improve the relationships with their agencies.
Also in this report, 81% of respondents expected a continued shift towards performance-based remuneration models with a focus on outcomes in the next 12 months. There is an increasing focus on project related remuneration, and one of the key trends today is marketers blending retainer work with other forms of remuneration, especially performance.
Performance metrics incentivize specific outcomes and encourage more collaboration between the agency and client teams. However, difficulties with performance consist of defining the right measures to attribute real value.
The Retained Agency Model
In previous years, the agency retainer models dominated the industry primarily because agencies knew the traditional platforms of broadcast and print well. Although this model is still common, client attitude has changed. According to Forbes, marketers are increasingly seeing instances where moving forward without an agency of record is not only possible but beneficial. Specialization has become increasingly important in the agency realm, and across the board, more marketers are led to believe that no single agency could possibly handle all of a client’s different needs.
However, the retainer model is proven to work well where there is a frequent need for strategic input and advice. It is ideal when a deeper understanding of the brand is needed, and often a longer-term agreement between the client and agency, which presents an opportunity to grow a trusting relationship. This way, agencies have the freedom and ability to dive into client strategy and goals which many marketers find great value in.
The retained lead creative and media agencies typically exist in smaller amounts and are considered specialists. For example, PR, CRM, data and digital agencies are often retained.
The retainer model creates more of a sense of accountability and also provides a higher level of consistency and predictability between work with a client. An agency that remains on the roster is typically considered to be the best in their field, and this model works well when there is a need for consistency and familiarity with the brand in order to overcome certain challenges.
This model may be most ideal for you and your team if you’re searching for:
- Trusted Advisors
- Client/Agency Relationship Depth
- Consistency of Approach
- Consistency of Contacts
The Bench Model
Completely opposite from the retained approach, some clients structure their agency model around a bench of preferred partners who have pitched for a spot on the bench and are involved and actively working with the brand in some form. This approach is becoming increasingly popular as there is an industry shift towards more project-based work.
This approach is more demand-based, with the clear benefit being flexibility. It allows agencies to call on expertise in certain areas when needed. The downside is the risk of asking an agency to work on-demand and hoping they’re available. Another challenge lies in attempting to create an integrated agency team made up of several different specialized agencies working toward one mission.
Creating any sort of long-lasting agency relationship through this model can be extremely challenging with the constant rotation of expertise needed on specific projects. No trust or allegiance is built up between a client and agency when the agency of choice is constantly changing. However, successful work on a particular project will lead to agencies potentially being prioritized for the next round of hiring. There is a greater level of uncertainty for the agency in this approach, but it provides a substantial amount of more flexibility for the client.
Project-based work can serve as a positive and efficient way for agencies to generate a profit if properly executed. The main purpose of this model is to cater to projects with more diverse requirements while simultaneously providing more flexibility for the client, putting an emphasis on project-by-project hiring.
The Single Client Team Model
One of the broader and more popular trends within the agency realm is the shift towards the cross-agency holding team. This operating model has become more relevant due to the following shifts and trends:
- A need for more integration between disciplines
- Simplicity in the arrangement: Clients have one point of contact, therefore making business as a whole an easier communication
- Cost savings
- Concerns around roster inefficiency
Mercedes, Vodafone, IAG, ASDA, and Walgreens have moved to this model. Higher profile companies such as these have adopted this model and while usually drawing resources from one holding company, some are beginning to ask staff from different companies to function as one team.
There is also a noticeable trend of startups acquiring agencies with skills to ensure they remain competitive against the traditional holding companies as well. Single agency teams are good for those who require:
- Integration of Teams
There is a prediction of more single-client teams to come in the future, but it’s certainly not the right match for every client. The future of agencies is likely going to be more customer-centered. Agencies that combine strategy, creativity, and cutting-edge talent will beat out competition for partnerships. The key things to focus on in this model are:
- Consistent senior representation
- Alignment of incentives
- Alignment of expertise
In this model, there is an added pressure for holding companies to retain business but a benefit for marketers due to the fact that they are given the power to determine which agency integrates seamlessly into their company goals and priorities.
There’s no one model that’s correct for every business. Many combine a mixture of the retainer and bench models in order to produce the best results. The different types of agency models are constantly evolving as the space becomes more complex, and the environment will never be static.
If you need assistance navigating the agency realm, reach out to AAR Partner’s to find the best fit agency partner for you and your team.