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What is an agency paid for? Activity or results?

What is an agency paid for? Activity or results? Featured Image

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I was in conversation with an agency recently who had been trialing Morphio. In reviewing their assessment a topic of conversation cropped up that had been a consistent debate for me during my time agency-side: what are people actually paying for when they hire agencies? Is it activity, or results?

Clients are paying for performance. Right?

It’s no secret that Morphio started life as a glorified spreadsheet within a digital marketing agency. If you’ve worked in an agency then you know exactly the spreadsheet I’m referring to. The one that attempts to pull all the data from disparate ad platforms into a single view so finance can monitor digital media spend and client services people get a view of performance – manually filled out or dynamically populated by API. They break all the time and need near constant management. But a view like this is necessary if you’re a performance agency. You need to know you’re performing – because clients are paying for performance? Right?

Well, no. Or at least there doesn’t appear to be a consensus throughout the industry. Opinion in our agency was split between those who felt we were being paid primarily for activity and those who felt we were being paid for results. For what it’s worth, I always came down on the side of results, but there isn’t really a clear cut answer. Most retainers will be calculated based on a number of hours of activity, but an agency hitting the quota of hours and not hitting results isn’t going to retain clients for long.

Practically speaking, the answer is that clients are paying for both

In some respects this is an academic argument. Practically speaking, the answer is that clients are paying for both. No client is going to be satisfied with a fully utilized retainer and no results; neither would they be content knowing that there was no work being completed even if the results were good. However, forced to pick one, I’d guess most clients would opt for the latter.

What I would point to is reporting. Now reporting was always an evolving exercise at our agency, finding the balance between internal efficiency and sharing enough to ensure client satisfaction. That evolution always tracked towards uncovering the true core KPIs and reporting exclusively on those results – good or bad. It undoubtedly shaped Morphio in its early years and has continued to evolve with the same MO ever since. Having clients laser-focused on results helped unleash the potential of the retainers. It kept the focus on hitting the important goals and allowed weekly conversations with clients to be far more expansive, identifying other unexplored opportunities.

There’s no right answer here, but for what it’s worth, our focus on results primarily created an environment where our retainers could be better dedicated to more open-ended thinking to help push things on – versus an activity focus that would see every hour dutifully utilized but without the same freedom.

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