Clients & Currency
Recently we were asked to meet our client’s new ad agency, to brief them on what we’d been up to in terms of messaging, market reception, etc. It was a good session; lots of give-and-take, lots of brainstorming. Then, the bill came due. Our client got an invoice from the ad guys for something like $2K, just for that 2-hour meeting.
You do not build currency with clients if "currency" is your first priority.
That’s the problem with the "Time & Materials" model favored by most professional services companies: no one likes the feeling of being nickel-and-dimed. As a client, how can you be free-thinking and creative, how can you build a lasting partnership, if you know "the meter is running" whenever you interact with your agency team?
We favor the retainer model — we charge a flat fee, month over month. We talk about "budget" with our clients on an annual basis, not every month as our T&M peers need to do. When we over-service our accounts (which happens routinely), we keep our mouths shut. By the same token, when we’ve undershot the month’s billings (rare), we don’t expect a call from an angry client. It tends to even-out within the 12-month contract term.
There’s a reason that idioms like "Don’t be penny-wise but pound-foolish" come into existence. It’s been my experience that if you stop sweating about every penny, you tend to build lasting "currency" as a favored partner.
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Great point, Todd. I hear this time & again from new customers growing weary of the old model. Especially small business owners.
The “Time & Materials” way is about to go bankrupt.
Interesting Todd. When I used to work on the client side of the marketing equation, we hired an ad agency who would bill us per hour. We never had a problem with it because the previous agency (before I came on board) used the retainer model, and it worked to our detriment — they almost always under-serviced us based on the fee. So my only experience with the “time & materials model” has been a positive one.
However, I agree that if both sides are constantly nickel-and-diming each other, the relationship doesn’t work well. One thing that helped was that when the new agency came on board, they agreed to write off the time for the initial meetings bringing them up to speed on our account, since they considered that to be a business development activity. We also learned that the actual bill does not necessarily need to be exactly the same amount as the estimate – sometimes it will be under, sometimes over. We only got into discussions about prices if the estimates were WAY off, which was extremely rare and we were always warned first if a project was going to require more time than initially thought.
I think it just boils down to having a healthy respect for each other’s work and good communication. No surprises.
Thanks for the comments…
Laura – I agree that respect & communication are key to any relationship. I guess in my experience “greed conquers all” and thus (of the two) the T&M model is more likely to be abused.