Analysis: What's more (cost) efficient - project work or retainers?

Retainer or an project-based work? What works better? While both types of partnerships bring different merits to the table, retainer work generally allows for agencies to plan long term and allow clients to build up their brands with one core team. It can also mean that clients have to pay agencies every month, even if there is a lull. In the current economic climate, where businesses are faced with volatility, marketing dollars are no doubt being impacted. This then triggers the question of if project work should take precedence over long term projects to ensure more efficient spend.

Although cost is often thought as a key consideration factor when it comes to inking a retainer or a project work contract with agency partners, marketers seem to see it as a secondary factor. Speaking with Marketing, Eugene Lee, regional director of marketing, Asia business unit at McDonald's, said although the pay-as-you-go model for project work can be good cost management for brands, it can also mean a lack of stability in the partnership. Moreover, from a client's perspective, if project work results in the lack of a core team, it can lead to poorer understanding of the account. But of course, on the flip side, it can also allow for more flexibility.

“For stability and effectiveness, McDonald’s prefers retainer work,” Lee said, adding that by having a retainer, the agency will be able to resource the teams properly and have people with long-term experience with the brand working on the account. This ensures that the agency teams can grow with the account, and build a better relationship with the client and have a level of comfort in proposing new ideas. Given the talent will also be working on the business daily, it will result in a higher level of understanding of the "do’s and dont’s" of a brand.

When it comes to productivity levels, Lee was quick to note that engaging agencies on a project basis does not necessarily mean productivity levels will improve. In fact, because adhoc can sometimes be a result of last-minute work needing to be executed, the time pressure on agency partners can also lead to the work not being produced to the best quality.

On the other hand, Cheryl Lim, VP, head of branding, communications and sponsorships, Manulife Singapore, is of the view that productivity is not dependent on the partnership arrangement. Rather, it depends on the calibre of those working on the account, and also the chemistry between the client and the agency. Collaboration and co-creation are key, regardless of whether the piece is being supported on a project or retainer basis.

No matter the nature of the partnership, a two-way communication is needed where clients and agencies work together to understand the brand, business objectives and create a detailed brief with a feasible timeline. “From experience, the right people can always get this done, whether working with us for a month or a year,” Lim said.

While McDonald’s prefers retainer work, Manulife Singapore has a mixture of both retainer and project works. According to Lim, the decision is largely contingent on Manulife’s forecast for that specific type of work. “Where the scope of work is broad, ongoing and has potential to evolve, a long-term relationship via a retainer makes for good business sense. On the other hand, if we’re looking for a more reactionary solution to a current challenge or require a particular expertise, working on a project basis might then be the road we take,” she added.

Elaborating on the pros of engaging in project-based work, Lim said that one of the key benefits is having the option of bringing in specialists as needed. “Whenever there is an opportunity to explore new ideas or formats, we’d like to know that we have the flexibility to engage a subject-matter expert,” she said. But the downside to this might be that certain talents or teams may not be available at the given time to take on the project. This would then lead to more time and effort invested in ensuring brand consistency across the board.

She added that retainer work brings about greater consistency and continuation across all work produced, which goes a long way in establishing a clear identity for the brand. “With the same group of professionals working on the brand for a good amount of time, there is always the assurance of depth of thinking given the team’s knowledge on all the ins and outs,” she said.

Agencies’ take on it

Agreeing with both Lee and Lim on the pros of retainer work is Rika Sharma, Digitas' ASEAN managing director. According to her, retainer work gives clients access to a team that is dedicated and knowledgeable on its business, which often allows for meaningful relationships to foster. This is similar to long-term brand-building. From an agency perspective, the retainer model also allows for far more stability in terms of revenue and cash flow, better management of talent, and ability to grow the client portfolio. Additionally, agencies can invest in new offerings and products and overall be a lot more strategic in its vision and operation, she added.

"Often a high project-based agency business means the need to constantly pitch, talent fatigue and overutilisation," she added.

But the reality is that in ever-changing times such as today, flexibility is needed in job scopes that the agencies take up, which the retainer model does not necessarily offer for brands. Project work also enables agencies to recognise quick revenue within a shorter time frame.  Moreover, in some unfortunate cases, the retainer model will also shackle brands and agencies together until the retainer period is over, even though expectations are not being met.

"A project-based model can allow agencies to be more focused, seeking work that is strategically aligned to their business needs, delivering on scopes quicker, and being recognised for deliverables," she said. However, in the project-based model, the opposite could happen as well where agencies have to compromise on fees due to the uncertainty of the business.  For Digitas, the agency attributes 55% of its work to retainers and 45% to project work. Sharma added that the future requires a better renumeration model that goes beyond the current scoping methodology of resources and hourly rates. Brands and agencies should work together to adopt a value-based and/or performance-based compensation. The value-based compensation will recognise the "value" agencies can deliver and the performance-based compensation can ensure that agencies have skin-in-the-game.

Goodstuph's CEO Pat Law also supports Lee's view that retainer work provides agencies will the opportunity to grow with brands, and to understand it better over time. She added that it is difficult to decide, from an agency’s point of view, if project or retainer work is better because there are many variables involved such as budget, campaign period, the brand, and the nature of the industry it is in. Currently, most of the agency's clients have opted towards a retainer model.

Ashvin Anamalai, chief strategist of Malaysia marketing agency Be Strategic, is also of the view that the dynamics between client and brand is vital. “Building a relationship with both the client and the brand is important in developing engaging and effective solutions,” Anamalai said, adding that the agency prefers a holistic plan that looks ahead to nurture a long-term relationship as opposed to just taking care of “shallow, immediate needs”.

With retainers making up 40% of its work currently, and the agency looking to increase it by 15% in the next year, Anamalai believes that retainer work is a better fit for the agency as retainers allow for creating long-term goals to build customer relationships. “To me, this is the best way to communicate with the audience; to converse as oppose to shouting,” he added. However, Anamalai also acknowledged that the downside of retainer work includes increasing difficulty when it comes to keeping things fresh and new month after month.

Although he understands how some businesses need support for adhoc projects, Anamalai believes that paying a finite amount for a finite piece of work is counterproductive as the work is over as soon as it starts to gain good traction. He also sees some merit in project work, where agencies can learn the most as they need to find their feet in terms of the collaboration process, style, definition in a short time frame.

Meanwhile, Fiona Bartholomeusz, managing director of formul8, believes greatly in the merits of project work. Bartholomeusz told Marketing that 100% of its business comes from project work, adding that doing project work allows the agency to expand its breadth of expertise from extensive work across multiple entities. According to her, having an exclusive retainer usually negates the agency’s ability to do so. According to Bartholomeusz:

It is more lucrative for agencies to take on project work, as retainers also mean that rates tend to be negotiated lower.

In response to the opinion that having a more dedicated team will lead to better work produced, Bartholomeusz said it is debatable. She added that working on a project basis will ensure its agency is allocating its best people for any one project, and this might change due to new hires, improved skillsets or having someone on the team grow into a role. “The onus is on us to keep the work fresh, effective and on brand and this should happen whether or not [brands] pay us a retainer,” Bartholomeusz said.

She also noted that the business landscape is very different now, and agencies need to be supportive in understanding that brands will experience peaks and troughs in their marketing life cycle. “Creative teams need to realise that there is no ‘down time’ and an assured retainer where they can take their foot off the pedal. Surviving in this industry (and more so now) means being on your A-game on every assignment, it is survival of the fittest,” Bartholomeusz added.

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