The abstract nature of creative services
In many service businesses, the notion of getting "ripped off" can be somewhat abstract. The value of certain types of services is highly subjective. This is certainly true when dealing with creative service businesses, in which the value of work product is especially difficult to valuate.
I was not around at the dawn of the advertising industry; however, I imagine that debates between brand managers and agency executives are as old as the industry veterans who ushered in the golden age of advertising. Debates including:
- How should advertising agencies charge for their services? Hourly? Retainer based? Revenue share? A hybrid model in which the agency is somehow measured against its client's bottom line?
- What is the value of intellectual property, and how does that factor into fee structures?
- Do agencies need to guarantee specific resources, or can work product, if satisfactory, be independent of staffing fees?
These are just a few questions that come to mind when I think about the pitch and negotiation processes that occur between brands and agencies. Attempts to answer the aforementioned questions make the agency-brand courting dance a fairly painful one.
For some, the above questions are just the baseline; enter emerging media channels, and now the real fun begins. New media channels have made the negotiation process even more complex. Adding new competencies with few business model precedents to follow (e.g., social media) will tend to confuse at least one high-level executive somewhere in the mix, which leaves others feeling as if they are dealing with a confederacy of dunces.
So the question remains: What are the best practices to follow when it comes to agency-brand negotiations? How can parties come to an agreement that doesn't leave one side of the table -- or, worse, both sides -- feeling as though they've been ripped off? That is the question we'll explore here.
