Minimum PR agency retainers are back on the menu

As the market picks up, talk of minimum agency retainers can be heard once again in Silicon Valley. Back in the boom, some agencies interviewed prospective clients and set minimum criteria to be admitted to their roster. Then the bubble burst, the pendulum swung the other way, and clients once again had more control, so agencies often took what they could get. Things are picking up, and sure enough, the words ‘minimum retainer’ are being whispered in agencyland.

Personally, I’m against the concept where it becomes inflated beyond commercial requirements. I have heard several agency principals boast about their minimum retainers of $20,000 per month or $40,000 per month, as if it were something to be proud of or a sign of their worth. While it might give them a warm feeling inside, when it comes to clients it’s a real turnoff. I’ve lost count of the number of times I’ve had prove that not all agencies behave that way.

The fact is that clients buy a PR consultant’s time. That time is spent on a variety of activities which generate results for the client and should lead to sales, increases in share price etc. The less time you spend, the fewer activities delivered, the less the impact on the business. If some agencies price their time more highly than others, presumably it’s because the results of those efforts have an even bigger impact on the client.

All this is straight-forward market dynamics. What I dislike is the concept that a client must spend a certain amount to be worthy of attention from an agency. Since when was PR budget directly proportional to talent, passion, drive, strategy, potential or cultural match? PR firms are not a fairground ride where you have to be a certain height to get in. It’s not unsafe to work at a low level with an agency, if it is the right fit and gets the best results for the amount invested.

Sure PR budget is an indicator of the value a firm places on PR. With more time, you can deploy more tactics and become more involved, but I have worked with many emerging companies where we’ve had a huge impact on the success of the company, just through being focused. That is extremely satisfying personally, and professionally it furthers the reputation of PR by delivering a real impact on a business.

This doesn’t mean that all large agencies should accept clients with small retainers. Clearly there is a critical mass where it would be uneconomical for them to work with a client due to overheads. Oftentimes that agency would probably not be the right fit for a smaller firm since it wouldn’t get the right attention. It has to be good for both parties. But the fact is that many agency minimum retainers are way above that commercial threshold. It’s a kind of test to see if companies are serious or worthy of the agency’s wise counsel. That doesn’t feel right. No-one likes a snooty realtor or maitre d’. Let’s not bring ourselves to that level by belittling prospective clients who are interested in working with us.

I’ve heard the counter argument that a minimum retainer ‘weeds out the chaff’ and that you shouldn’t let smaller, unknown firms onto your roster since it reflects badly on the agency. Well, sure not all those firms will make it. But isn’t the point of what we do to build the brands of tomorrow, as much as manage the leaders of today? I’d argue it’s often more fun to build a company’s reputation than to inherit it, and that doing so speaks volumes about the agency itself.

I’m not saying that I want to work exclusively on emerging brands. In fact, I enjoy the complexity of managing large global programs. But I hope we don’t make the same mistake we made before, as the economy lifts. Supply and demand may impact agency prices, but agencies shouldn’t treat emerging companies like kids too small for the ride.

  • Those that forget the past are doomed to repeat it. That might be the motto for the Bay Area. It amazes me that people forget that the economy is a very fickle and sensitive thing, and that you never know what is going to affect it, or what will happen.
    I met a firm here in Scottsdale that told me that they won’t take a client for less than $Xk a month; I looked at the VP and said “best of luck.” In Arizona, it just doesn’t work that way, especially at the price they were demanding.
    And, sometimes you have to take a chance on a company that might not have the budget, but has the concept and idea, and is able to actualize on it.

  • This is a tough issue, something a lot of firms are grappling with right now. I don’t think the principals at many PR firms realistically expect retainer minimums to return to anything remotely similar to what they were in the boom, but at the same time, as the economy stabilizes and demand increases, agencies have to be smarter about the types of companies they take on – and it goes way beyond just revenue potential.
    For example, HR is a *huge* factor. As an agency you’ve got to be able to map personnel with new business while balancing the integrity of existing account teams and maintaining an overall quality of work level. Trying to do all this, plus grow a business requires that you set some sort of standard (like a minimum retainer), otherwise your people are faced with staffing multiple smaller accounts (3-4) to make margins, which just opens a firm up to all sorts of other problems (e.g., degradation of work quality, burnout, turnover). It’s a tough issue…