MANAGEMENT ADVICE FROM THE CREATIVE BUSINESS NEWSLETTER

Providing our creative clients with the best Ad Agency software and the best Project Management software is only part of the story. Ensuring that our clients become successful through practical and proven business advice is part of the wrap-around service that Creative Manager, Inc. provides to its creative clients. That's why we say 'Ad Agency software and Project Management software is only part of the story.'

In the article below, originally published in the Creative Business newsletter and reprinted here with their permission, editor Cameron Foote introduces readers to an understanding of the differences between a creative firm and an agency. (Contact and subscription information for Creative Business is at the end of the article.)

WHAT IS IT THAT MAKES A CREATIVE FIRM AN "AGENCY"?

If you've ever been surprised by a man named Beverly or a woman named Charlie, you know that names can sometimes be misleading. So, too, with names in business. What, for example, is it that actually defines an "agency?" Can an agency consist of nothing more than a single individual? What about a boutique that conceives and executes ideas but doesn't place them? Or a firm that does mostly design but occasionally places an ad?

It may be a moot point anyway. Traditional ad agencies are just as likely today to call themselves "brand positioning strategists;" public relations agencies adopt a "communications management" label; and direct marketing agencies sell their services as "database marketers." A little aggrandizement can often be good for business.

But regardless of how you choose to identify (sorry, "strategically position") your business, there are some things to consider when becoming involved with the on-going assignments that constitute most "agency" type work.

THE LEGAL DEFINITION
While the term "agency" is often used casually, it does have a legal definition. Black's Law Dictionary defines an agent as "a person authorized by another to act for or in place of him... to transact all business...of some kind...."

Whether or not one is a legal agent for a client is defined by the agreement between them. Having the agreement in writing (letter of agency) is not absolutely necessary (it can be oral), but it is certainly desirable to avoid later conflicts and misunderstandings. It is immaterial whether the creative supplier is a traditional advertising, public relations or design firm, or individual freelance.

What is an "agency of record"? This definition is a little less precise and is often associated more with bragging rights than legal rights.

An "agency of record" is usually understood to be one with an agreement making it the client's exclusive agent for a particular product or market. For clients with several agencies, it is usually the one that coordinates media buying and scheduling.

What should be in the agreement? The content of an agent agreement can be pretty much anything both parties mutually agree upon. Creative Business recommends, however, that it cover at least the following five points: 1) definition of the services to be performed... 2) absolution from responsibility for media and other client obligations... 3) terms of compensation and payment... 4) cancellation conditions... 5) a requirement for binding arbitration in case of disagreement.

A typical ad agent agreement is reproduced below. It is written for fee-based compensation because that's the way most small agencies operate. It can be easily modified to accommodate commission-based compensation when appropriate. (For definitions, see "Commission? Fee? Retainer?" below.)

Use the sample below as a guide when drafting your own agreements. But even if you make few or no changes, be sure to have your agent agreement checked by an attorney before presenting it to the client.

When you should and when you shouldn't. Without an in-force agent agreement, it is inappropriate to use the word agency in a specific sense‹i.e., for a particular client. It is appropriate to use the word in a generic, business sense‹i.e., to describe the type of work your firm handles. In other words, if you look like a duck and act like a duck, feel free to call yourself a duck. Just don't call yourself Client's Duck without an agent agreement.

DOING AGENCY WORK
Firms that handle mostly ongoing assignments‹our definition of an agency‹operate differently from those doing mostly project assignments. Here are the fundamental differences.

Planning. Clients are much more likely to ask an agency for strategy, planning, and budget recommendations. While this provides more opportunities, it also requires marketing knowledge and an understanding of what is appropriate in various circumstances. And it carries with it much greater responsibility and accountability.

Resources. Agencies need access to research and media resources. Basic media information can be obtained from such sources as "Standard Rate and Data," and "Bacon's Publicity Checker," which are available in most large libraries. More extensive media needs require staff or contracting with a media buying service. Small agencies nearly always contract out research to a market research firm.

Creativity. Agency work is more likely to be focused around selling products, whereas design and editorial assignments are more likely to be focused around organization, explanation, and decoration. The limited space and short viewer attention span of ads also encourages development of the "big idea," along with finely-honed art and copy. Talented individuals can adapt to working in either style, but it takes desire and discipline.

Service. On-going assignments are very service-intensive. This means having staff adequate to handle regular client contact, media placement, insertion verification, follow-up analysis, and client billing.

Conflicts of interest. The more intensively you work with any client, the greater the possibility of a conflict of interest with a similar client.

When working on project assignments, conflicts are not usually a problem. Projects for similar clients are normally separated by time, and minimal knowledge of client plans and trade secrets are involved. For example, doing brochures for two different banks at two different times would probably not compromise the interests of either. (Caution: it is always best to acknowledge previous work for a similar client to avoid any perception of a conflict.)

Ongoing assignments are a much different situation. Client contact is continuous, and it is difficult to be equally loyal to two competitors. More important, the agency is often entrusted with proprietary information. Because of this, agencies should work with only one client in any particular field. For example, only one bank, one auto dealer, etc.

Spec work. It is much more common in the agency world, where the stakes are higher. It may be necessary to land some accounts.

COMMISSION? FEE? RETAINER?
The commission basis. Most other agents (e.g., insurance, travel, real estate) work for a commission on the business placed on behalf of their clients. The commission is usually paid by the firm receiving the business.

This was once the way it always was in the advertising business, too. A media commission is still the norm for most large-budget accounts, particularly those involving broadcast time. In this arrangement, much of the preparation (versus placement) cost is "free" to the client.

The traditional media commission is 15%. As an example of working on commission, let's say you prepare and place a full-page ad in a trade magazine for a client. The cost of the space is $2,000. When the ad appears, you will likely get a bill from the publisher looking like this: