Agency Compensation - Variables that Impact Pricing

It's tough to make predictions - especially about the future.
                                                                    - Yogi Berra

How much will it cost to build an x for us? Where x stands for Website, Microsite, Facebook Page, Mobile App (or even a House, a Bridge, an Aircraft Carrier). Tough question, right? The answer is, "It depends". What kind of x do you want?

Unfortunately, this question is asked by clients of their agencies every day. Given the recession hangover, fortunately it is still being asked. I find that a little education helps either avoid this overly, simplistic question or more productively, it helps point to a method for finding an answer. The approach pretty much has to do with helping your client (as well as your team) understand the variables that impact pricing.

While on the topic, in the spirit of precision, I like to define terms. In general, the price of services and/or deliverables is made of two components: fees (pretty much labor) and costs (usually pass-throughs, such as travel, licenses, equipment, etc.).

Below is a list of some of the variables impact the price of a project. As I hope you can see this list will generate some pretty interesting discussions that, if handled, properly will result in a level of professional empathy that should elevate all involved

• objectives’ clarity / validity
• strategy integrity / clarity
• project duration
• time of year   -   for info on an ugly confluence of factors, see Use It or Lose It
• program complexity
• state / quality of assets, briefing, brand and style guides
• 3rd party involvement (e.g. other agencies, technology vendors, email / sweeps vendors, client-internal parties [legal, IT, etc], client-external partners [other marketers])
• scale & volume (planned scale decreases pricing)
• review / approval process – including: cycle duration, feedback quality / consolidation, and number of stakeholders (e.g. marketing, legal, compliance, branding, etc.)
• specification quality / stability
• production value
• costs (e.g. photos, video, locations, research, technology, travel needs, etc.)

The old Triple Constraint is also a valuable concept to help frame an agency compensation discussion with clients and your team.

There's a wide range of things on the agency side that also impact pricing, such as available staff, their skills, their rates, etc. Is it fair to charge a client an Art Director's rate to do a Production Artist's tasks? Same answer, "It depends".


Let us know your thoughts or if you have some other major variables that drive pricing.

Aligning Stakeholder Expectations - What's a PM to do?

Below is one of the best articulations (definitely one of the most humorous) of why there needs to be a person or party looking holistically at engagements and focusing her/his energies on driving stakeholder alignment. If you’ve been in an agency for decades or just arrived on the last boat, the issue highlighted in this strip should resonate.

Click on the strip image below to enlarge and/or check out the video variation on the theme below it.

Please add your insights, experiences and anecdotes in the comments section of this post.

PM Leaders - Areas of Greatest Challenge: Survey Results

I sent out a survey to some of the industry’s foremost interactive and integrated agency Project Management leaders to get at some of the major challenges that confront, not only PM’s but agencies in general. IMHO, these leaders are in a unique position to assess what it takes to make the ecosystem work and what makes things grind to a halt or worse. If you'd like to take the survey, see the link at the bottom of this post.

If being a PM is one of the toughest jobs in the biz, leading a PM group can be a real bear. Like other discipline leads within an agency, the Group Director of PM/Delivery or the Executive Producer has no real peers inside. S/he is faced with a learning curve that can go long stretches without gaining much altitude, and has responsibilities that pull in many competing directions. One lead told me that, “I gave up the illusion of making everyone happy long ago. I figure, if everyone’s just a bit, and equally pissed, and trust in my judgment is more-or-less intact, that’s about as good as it gets."

My hat’s off to these leaders and am thankful to those who took the time to share their perspectives for this survey. Although your successes don’t always yield overt evidence, the absence of your experienced hands often does (PM Success, Where’s the Evidence).

Results from the survey are not necessarily surprising but are illuminating none the less. The overall survey explored the following areas:

• Variables that provide the most challenges (e.g. timing, pricing, client communication, etc.)
• Stakeholders who provide the most challenges (e.g. creative team, account team, clients, etc.)
• Areas of PM skill/responsibility that PM’s find the most challenging (e.g. tool usage, being too strident, being too passive)

This post features results and commentary on first topic: Areas of Greatest Challenge to project managers within agencies Subsequent posts will address the other areas.

Timing

No news here that Timing, which a full 88% of PM leads, ranked as either Consistently or Often providing a major challenge came out on top. Compressed timelines are always going to be part of this game.  Actually getting more time for assignments is going to be tough. Using available time more effectively is where PM’s can have the most impact. A few thoughts on this topic include:

• Improve the briefing process
  This upstream event and the documentation surrounding it happen early enough to ripple through the entire process and a can be traced as the source of many common errors
  
• Present solutions that can actually be achieved in the time available
  It’s simplistic to lay the blame on, “Creatives Gone Wild”. PM’s have a responsibility to drive a team and client to put great ideas through the reality-filter of time – just watch out for getting labeled as a No-(Wo)Man
  
• Be critical of your Project Plans
  Just because you can make MS Project land on a date, doesn’t mean the work will. If you’re project plan has too many 1-hour durations or -2 day lags, it probably isn’t going hold up very well.
  
• Consider phased releases
  Not the way they are often landed on – as a reaction to circling the drain towards your deadline the days before launch, but as an actual plan at the outset

Money

Again, no surprise that timing’s buddy, money is near the top of the list. Once their backs are against the wall, clients or agency execs will often try to throw money, which often means bodies, at an issue. This approach has a pretty unfavorable curve of diminishing returns.  Although, this does come up, I wouldn’t worry about that situation too much, as another common challenge, marked at a combined Consistent or Often ranking of 59%, is Pricing.

What puzzles me is the relatively low 17% of PM Leads that indicated Timing as only Occasionally a challenge and the remarkably high 41% that indicated that Pricing is only Occasionally or Seldom an issue. I’d love to know where they work, who their Account Management partners are or what’s in their secret sauce.    

Communication

Of the 3 areas addressed, Internal Communications, Client Communications and 3rd Party Communications. Internal and Client Communications offer the most consistently identified areas of challenge. This too is an area where the project manager can have a substantial impact. Structured communications in a variety of media such as, Official Project Documents (e.g. SOW’s and Contact Reports), Emails, IM’s, Project Plans, Budgets, and PowerPoint and verbally are critical to PM success. This is one of the major areas where PM leaders can train and influence the efficacy of their teams.

The surprise in these areas was that a full 36% of the respondents reported that 3rd Party Communications was only Seldom a challenge area. More power to you. The rising complexity of deliverables and the amount of subcontracting by bigger agencies to smaller, specialist vendors would suggest that this would be a growing issue. Perhaps the experience and quality of individuals who have begun to populate these specialist organizations has added some stability to the ecosystem.

If you’re interested in adding your $.02 on the general Areas of Greatest Challenge for PM's as well as a couple of other related topics, please do so here, (it's just 3 questions) and/or do so in comments to this post.

Thanks for playing!