What your agency actually bills you for

I want to begin by saying something that this article is frequently assumed to be arguing, and is not: agencies are not overcharging you. Most of the agencies operating in this region are doing competent work at a rate that was reasonable when the rate was set. The problem is not the agency's conduct. The problem is that the arithmetic underneath the arrangement changed, and neither party has had a commercial reason to reopen it.

A marketing retainer is not one purchase. It is two purchases on one invoice, and they have moved in opposite directions.

The two halves of a retainer

Take whatever you pay monthly and divide the work it covers into two categories. The distinction is not creative versus non-creative, and it is not senior versus junior. It is judgement versus production.

• -Judgement. Deciding what the campaign should say. Understanding a market well enough to know which argument will land in it. The taste to reject three good routes in favour of the right one. Arguing with you when you are wrong.
• -Production. Turning that decision into the forty things it has to become: the resizes, the variants, the localised versions, the channel adaptations, the monthly report, the deck that summarises the monthly report for someone who will not read the monthly report.

The first of those has not become cheaper. If anything it has become more valuable, because there is now a great deal more output in the world and correspondingly more need for someone with the judgement to decide what should exist at all.

The second has fallen off a cliff.

Why nobody has reopened the conversation

Because there is no natural moment to do so, and because the incentives on both sides point away from it.

Your agency knows perfectly well what has changed. They are using the same tools you have read about, and in many cases using them rather well. But a retainer is a fixed monthly figure against a scope of work, and if the scope is still being delivered there is no contractual event that triggers a repricing. No account director is going to open a quarterly review by explaining that a third of the scope now takes a quarter of the time. That is not dishonesty. It is simply that nobody volunteers a price reduction in a business built on retained revenue, and it would be strange to expect them to.

On your side, the retainer is one line in a budget that was approved and is now not being thought about. It is working. The work arrives. Marketing directors are not short of things to examine, and a line item that is not causing a problem does not get examined. This is precisely how a cost survives long after the conditions that justified it have gone.

How to do the split, in an afternoon

This does not require an audit or a consultant. It requires the scope of work, the invoice, and about three hours.

One. Print the scope of work. The actual appendix, not the proposal narrative. If you cannot find it, or it has not been updated in two years, that is itself the finding, and you can stop reading here and go and ask for it.

Two. Mark every line J or P. Judgement or production, using the test above. Be honest about the middle cases and put them in production, because the middle cases are almost always production wearing a more expensive title. "Campaign adaptation for the Saudi market" sounds like judgement and is usually production with a translation step in it.

Three. Ask the agency how the hours divide. Not how the fee divides - how the hours divide. Most agencies will tell you, because most agencies track it and because the question is a reasonable one. You will frequently find that the majority of the hours sit against the production lines while the conversation about value is conducted entirely in terms of the judgement lines.

Four. Price the production half separately. Take the three or four largest production lines and establish what it would cost to produce them internally, with your existing team, using tools they already have licences for. Not hypothetically: take one real deliverable and have someone attempt it. You will get a number in a day.

Five. Have the conversation. Not as a negotiation about the rate, which produces a defensive response and a worse relationship, but as a conversation about the scope. The question is not "can you do this for less" but "should this still be with you at all".

What usually happens next

In my experience the outcome is rarely the one people anticipate when they begin. Very few organisations that do this exercise terminate the relationship, and the ones that do were generally unhappy about something else.

What typically happens is that the retainer becomes smaller and considerably better. The production lines come in-house or move to a lower-cost arrangement. The agency keeps the strategic work, which is the work they wanted to be doing, at a rate that reflects what it is actually worth. Both parties end up with a relationship that is defensible on its own terms rather than one that persists because reopening it would be awkward.

The agencies I have seen handle this best are the ones that raised it themselves, because an agency that tells you which half of its own scope has become commoditised has told you something very useful about how it intends to behave in every other conversation you will have with it.

The counter-argument, fairly put

There is a real case against doing this, and it deserves to be stated properly.

Production and judgement are not as separable as the framework above implies. Some of the best creative decisions in a campaign are made during execution, by the person doing the resize who notices that the crop does not work and reopens the layout. If you remove the production work from the agency, you may also remove the hundred small corrections that were happening inside it, and you will not notice for a quarter.

There is also a volume argument. Agencies price on relationship as much as on scope, and a retainer that halves may find that the senior attention halves with it, regardless of what the contract says. That is not stated anywhere and it is entirely real.

Both points are valid. Neither is an argument for leaving the arrangement unexamined; they are arguments for moving the production work deliberately and in stages rather than in one instruction, and for being explicit with the agency about what you expect the relationship to look like afterwards.

What I would do

Do the split. It costs an afternoon and it will tell you something you do not currently know about a number you are paying every month.

Then move one thing. Not the whole production half - one line, chosen because it is high in volume and low in controversy. Monthly reporting is usually the right first move: it is entirely production, everybody finds it tedious, and nobody's creative pride is attached to it. Build it internally, run it for a quarter alongside the agency version, and compare.

If that works, you have a number, an internal precedent, and a considerably better basis for the annual conversation than an opinion about market rates. If it does not work, you have learned that for the price of one workflow rather than one relationship.