Hidden costs in creative work |
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| Finance - News | |
| Monday, 07 April 2008 | |
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Creative agencies should be transparent in their approach to fees and mark-ups. Businesses who work with creative agencies may not realise quite where their money goes. You might think you have negotiated a good rate on fees, but are they being bolstered by hidden mark-ups on disbursements? Take that snazzy new corporate brochure you have just produced. Did you know that 40 per cent of the print price might have gone straight to your creative agency? Sara Hudston, principal at Watershed PR, said that marking up is a common practice and not intrinsically wrong. She added, however, that it becomes a murky area when clients do not know the percentage their creative agency is taking or worse, they do not know it is happening. In some cases they may even be led to believe it is not happening at all, when it is. Hudston came across one company who were quoted an astonishing price for a print job. The company asked the agency if this was the cost price or whether it included an agency mark-up. The agency denied that they were marking up, and, when challenged, admitted to a small percentage. “It was obvious to anyone in the business that their cut was much bigger than they were admitting. We managed to secure the same job for a third less saving the client nearly £30k in the process. The real issue wasn’t cost-saving, it was honesty, transparency and trust,” she said. Consultancy based businesses are often the middleman between clients and suppliers. With agencies responsible for selecting and managing the best supplier, clients place a great deal of trust in their agency. Often the client only sees the end of the process, when the bill for the supplier’s work is sent through with the agency monthly fee. It has become common for some agencies to build-in an increase to the supplier’s original price on the client invoice. The traditional argument put by agencies is the increased fee covers agency resource costs for managing the supplier. Fair enough, but should this not be visible? ‘Marking-up’ as the process is known in consultancy speak, has become an established industry tool with many clients unaware of the way their monthly supplier fees actually break down. Fine if you know about it, less good if you do not. “If you’re not clear what’s happening, ask,” Hudston advises. Reputable agencies should be happy to explain their practice. She warned that marking-up can impair the trust between agency and client, however fairly it is done. Her own firm charges clearly itemised professional fees for our services, plus disbursements at cost. “It’s not about under-cutting other agencies and selling on price alone, far from it. I believe in building long-term business relationships and that relies on skill, trust and providing real value,” she added. Comments (0)
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