Are fixed monthly retainers the best billing option for PR agencies?

DKC's Sean Cassidy and Peppercom's Steve Cody debate the issue of fixed monthly retainers

Yes

Sean Cassidy, president of DKC: PR professional with nearly 20 years of experience, the past four in his current post

At DKC, billing our clients via a set monthly retainer not only gives them maximum value, but also brings out our firm's best.

The fixed monthly retainer model means that we can commit our full complement of creative and strategic thinking to our work, without being bogged down by the fits and starts that occur in an arrangement where time allocation must be hyper-aggressively monitored.

The creative process best plays out when it is relatively unencumbered by time limits. In fact, we have found that breakthrough insights often materialize at unexpected times – much to the benefit of our clients.

Ironically, a fixed monthly retainer gives us more flexibility – and this is something that keeps our staff motivated, engaged, and focused on big ambitions for their clients.

We place a great emphasis on teamwork and creativity, but give our teams considerable autonomy to achieve client goals. The fixed monthly retainer means that account teams spend their time on activity, such as strategic counsel, media relations, and digital marketing – not on managing bureaucracy. Moreover, it frees up the team to invest the time in thinking about the brand, bouncing around ideas, and jumping on the news of the day, without worrying about whether the monthly retainer is up or down.

Utilizing a fixed monthly retainer model creates a natural emphasis on producing results regardless of the time needed to do so, and keeps the paperwork to a minimum.

This billing approach provides a sense of stability that is comforting and predictable to clients, particularly in today's turbulent economic climate.

Often, our clients are steps removed from procurement or the accounts payable department, so a fixed monthly fee keeps things simple for them. The client doesn't need to explain why one month is more – or less – than another, or hassle with questions from some distant accounting department.

For our agency, this kind of billing arrangement lays the foundation for a motivated staff, results-oriented culture, and satisfied clients.

No

Steve Cody, managing partner and cofounder of Peppercom: Nearly 15 years at the helm of an agency; more than 30 years PR experience

In an ideal world, the very best arrangement is an annual fee. Because PR program activities ebb and flow as the months unfold, the budget should be apportioned accordingly. For example, let's say a client and agency agree upon an annual budget of $240,000 plus out-of-pockets. Rather than carve up the total into neat, monthly increments of $20,000, there should be recognition that certain months will require more hours, while others will need less. So, if the client has a major trade show in June, that month's billings might go as high as $35,000. At the same time, August and December are traditionally slow months, so those budgets might be as low as $10,000.

We provide our clients with “scopes of work” that outline next month's activities and project the time required to accomplish the agreed-upon goals. We also provide mid-month time reports so clients can see exactly how much time has been spent against the fee. If we're too high, the client will either authorize additional spending or will prioritize the remaining two weeks' worth of work so we do not exceed the monthly fee. It's a win-win that protects the agency, values our time, and empowers the client to make real-time strategic investment decisions.

Flat, fixed monthly retainers do not provide these benefits. I cannot tell you how many times we've gotten absolutely killed when a client has disregarded the fee, piled on additional assignments, and basically told us to suck it up. It's comforting to know that a certain client will be paying us, say, $15,000 per month, but not when we're spending $30,000 per month in time. Flat, fixed fees are inflexible by nature and don't reflect the vagaries of the business world in which we live.

These days, any budget is a good budget. But, what good is a flat fee if your agency is burning out and your profitability is suffering as a result? Give me a flexible annual budget that can be managed to meet the ebbs and flows of an account, and I'll show you a true win-win client-agency relationship.

PRWeek's view
Though having a flexible billing model can solve the issue of uneven workload balance from month to month, a fixed retainer provides the stability and security that clients and agencies are looking for. This makes it the better option. What's your view?

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