By Mike Lozito
There’s an oft-repeated story about a great artist who sketched a drawing in his signature style, right in front of a client. The client watched, then balked at the price because it had only taken the artist a minute. The artist replied, “No, it actually took me a lifetime.”
In the marketing version of this story, an agency conjures a brilliant tagline or logo on the spot, an act only made possible by the decades spent honing their craft. The point remains: the value that this work of expert creativity could generate for the client could be immense, therefore charging by the hour would dramatically devalue this service.
Yet the hours model is still what so many agencies self-impose, and fixate on, to measure our own value.
A year ago, TMA President (now CEO) Trina Roffino implored agencies to resist the commodification of our craft in an Adweek op-ed. Since then, as clients reduced marketing budgets over another volatile year, Trina’s rallying cry has become even more crucial. Our industry faces thinner profit margins. AOR assignments are being exchanged for more transient project-based work. And more agencies than ever are bidding for these projects, which ultimately drives fees downward. You can understand why agencies are becoming hyper-focused on assessing the health of the businesses in their roster and how to best value our services. But if you solely fixate on the attributes that we can measure profit and growth by, you overlook the intangibles that I believe truly yield long-term value.
This is a creative industry, yet our service models are monitored and evaluated by tools that ignore the creativity we are so valued for. Can creativity be measured in hours? What is the correct amount of hours to scope against an idea that reinvigorates a brand, makes it resonate in culture, and generates a 10:1 ROI for a client? How many hours does it take to win a prestigious industry award that could earn the agency new business opportunities?
When one becomes too hours-focused, it’s natural to become obsessed with controlling hours – viewing hours as a cost rather than an investment. Our industry is in need of a reframe to unlock the true valuation of what we do. If we reframe hours as an investment in our clients’ business we shift the focus to what we are getting in return for these hours:
- The foundation for mentorship and hands-on experience for our staff.
- The expression of passion and mastery of our tradecraft.
- The foundation for flawless execution.
- The underpinning of building trusting client relationships. It is within those trusting relationships where the healthiest client/agency partnerships exist, and it’s where award-winning work creating long-term value is often born.
For an agency to be overly critical of the hours we invest in our business is to limit the return on the investment. Those hours invested contribute directly and indirectly to nearly all the new business we will get as an agency. The work we do for our clients is our greatest opportunity to sell what we do to new clients, and we should exhaust ourselves to that task and to our tradecraft — for that is ultimately where all future value will be generated.
It is time for agencies to put some alternative models to the test. Performance incentives based on business KPIs? Project fees only? Deliverable rate card, not by person but by product/deliverable? The point is not to reject the hours model here and now, but to consider a variety of compensation models for our craft, and apply the model that is the best fit for the situation. Look at the different value exchanges, and match the model to the ask. To be clear, TMA has not cracked this nut, either. But going forward, we are going to be vigilant for opportunities to vet new approaches. Let’s make 2023 a year to test and learn. Our future depends on it.
Mike Lozito is SVP of Client Service in our Dallas hub office.