Why do we keep talking about how the agency model is broken? It’s not a model issue, it’s a value issue.

In the 1950s, advertising introduced the timesheet to put a metric against the cost of creativity. Now I've been doing this a long time, and I have no idea how long it will take to create a new logo or campaign. Could be a year or a few minutes spent scribbling on a napkin. Both can yield beautiful things.

Many would prefer to be compensated on value, but establishing value can be a bitch. It’s easier in a few data-driven areas of marketing communications—as with eyeballs and impressions, metrics are roundabout ways to suggest value.

So, like many other service businesses, we’ve landed on the perceived value of time to set pricing—not because it’s better, but because it’s the only practical option. Only time and experience-based guessing is required. Curious, when you consider that the faster you perform top-quality work, the faster it goes to market and the more likely the intended impact will happen sooner.

Clients have unintentionally incentivized agencies to throw time and bodies at a problem, then added layers of “accountability” so that the system isn’t gamed. But it's the misaligned incentives that are the conundrum. Lowering costs over decades by limiting areas of revenue in production and the like is understandable, but when are you killing your golden goose (and not even realizing it)?

Warren Buffett once famously said, “Price is what you pay. Value is what you get.” So why has it been so historically complicated (and, at times, painful) for clients and agencies to candidly and comfortably talk about value without talking about price? Why does discussing dollars and time make things more awkward than it should?

After all, rewards drive behaviors. Pausing from time to time to determine whether absolute money is the only reward in a business relationship feels like a solid move. Ogilvy famously said that you should negotiate your price arrangement with your agency. But the model was a tad different then. If you landed on 15% of the total budget for the agency, after the negotiation you’d reach out and offer 16%. That 1% will be negligible to you and pay off greatly in the attitude, free work and value the agency will give back. The trick, as in any relationship, is to work with the right agency.

A solution is to focus on relationships between parties on both sides. When the people who are buying the work/services are distanced from the people doing the work/creating the services, things can fall apart. It’s within our control to fix it. Here are some other things to consider:

Relationships matter—a lot

They are critically important—perhaps the most important—and can often mean the difference between the life or death of your contract.

Make no mistake, a smart agency knows that to be an effective consultant—let alone a business partner—it's best to be close but not besties. In healthy relationships, each side gives and takes happily. There’s a vested interest in each other’s success.

There’s more than one relationship at play, including the working relationship between marketers and, in our case, design managers. But there’s also the sort of contracts that are negotiated by procurement teams. The latter is a direct reaction to the pendulum swinging out of balance. I don’t need to tell you this, but procurement looks at dollars and delivery—it doesn’t look at existing knowledge bases, legacy relationships or even market performance.

And when one party is focused solely on quality and the other solely on price, what's an agency to do?

Perceived value is the relationship between cost and quality

Creative services are inherently hard to price. There's no cost of goods but rather experience and expertise. Yet, there is still a connection between cost and value.

We are in the “commercial art” business. Our work is in the service of commerce, and we’re part of a client's cost of goods. So, the value that's created must be exponential. Otherwise, what’s the point?

Investment vs. expense

Procurement generally looks through the lens of expense. Marketers, however, should be looking through the lens of investment. One is money sunk; one demands a return. Treating an investment as an expense devalues both the effort and the output.

Checks and balances

It takes a village to make sure that money, effort and output are in equilibrium.  Often, this requires a team representing each perspective. 

Master the art of professional intimacy

Earn respect, which over time turns to trust that fosters professional intimacy. Good agencies earn respect every day by showing up prepared and on time. They create objectivity out of subjectivity. They respond by giving the clients what they ask for and are always considering if that’s what the client really needs. They keep tabs on your category and keep you informed. They keep their promises.

Each party is invested in the other’s achievements, inclusive of saving the client’s money. At this level, a client and agency share hopes and aspirations. In some ways, the other’s success is more important than their own. And I promise you, it’s at this level you’ll be getting much more in added value than you’ll ever pay for.

Do unto others

It's the golden rule for a reason, but don't be discouraged if others play by different rules. Take the high road—with the understanding that your behavior can change the behavior of others.

And before you revisit the adage of “faster, better, cheaper,” consider that while you want it all, you can’t really have more than two.