Retainers are popular with both agencies and clients because each view the retainer as a way of managing risk. As Warren Buffet put it; "Risk comes from not knowing what you're doing." So who takes the risk when it comes to a retainer? The answer to that will be evident in the agency's P&L for that client.
So what are the risks?
There are risks to both sides. A retained agency team can become too comfortable which shows up in stale creative work, uninspired strategy, unprofessional interactions with clients in meetings and presentations and
The opposite is of course true for the agency. If the client is on top of things, they can end up pumping far more work through the agency on a retained situation than they would have been able to normally and the per project (or hourly) rate can plummet precipitously for the agency. In truth, this doesn't hurt the agency's bottom line, because smart agencies build the retainer fee around the cost structure of the team doing the work, so they're not at risk of losing money, but there's still the Opportunity Cost to consider. After all, it's hard to consider a $1.5M retainer a good idea when you could have gotten $2.5M for the work on a piecemeal basis...
Are retainers a good idea or not?
When the agency and client are well matched, it's hard to beat the benefits a retainer offers both sides. There are significant cost reductions in just paperwork alone, not to mention the level of trust that a retainer creates between client and agency. In fact, one of the best ways of securing a retained relationship with a client is by putting that trust on display.
One example is transparency - being willing (and able) to show the client what the team is working on, where their projects are at and how long everything is taking. Using tools like the Client Portal in Advantage's agency management system allows you to share information on projects, documents and production or media schedules effortlessly through a branded, permissions-based web site that you control.
And timekeeping tools like the RecordTime app can be used to both ensure the client that the time on their projects is being accurately captured and give the agency team the tool they need to do so.
The reason retainers have been around so long is because they have the potential to be the most cost effective and efficient solution for long term agency/client engagements. Whether that holds true for your agency and client will depend on how well each of you know what you're doing and whether or not you have the tools to successfully work together.
Schedule a free online demo of Advantage's AQUA agency management system and see why it's the #1 choice for agencies of all sizes. If you've never worked with a truly integrated system that brings your Project Management, Accounting and Media together, you'll be blown away by the possibilities it opens for your agency.