Agency Campaign Management Fees - Are You Getting Ripped Off?
Agency Fees
In the digital advertising world there is perhaps nothing more confusing or frustrating for the customer than the negotiation process around agency fees and finding an apples to apples comparison between potential vendors. Some agencies charge initial campaign setup fees while others may build those into their overall pricing. Some charge by keyword or campaign while others charge a flat rate that is tiered based on your total monthly spend.
The confusing nature of this negotiation is a disservice to both the agency and the customer because one side or the other will always feel like they are getting the short end of the stick. This is why Trustworthy Digital is a huge advocate for conducting these negotiations with integrity and transparency. While no one fee structure is without flaws, the most widely used and accepted structure is that of a flat percentage of media spend as a fee for services rendered.
Because the flat percentage of media spend structure is most common in the industry there is intense competition around bidding for business. Digital agencies commonly undercut each other during the RFP process by providing the lowest media fee percentage possible to entice customers to select their solution. It is not uncommon for some agencies to charge as low as 10% of total spend. However, no agency can run a profitable business on a 10% margin and keep the lights on.
Once the agencies win their bids at a low percentage fee, they are forced to find other ways of raising the profitability of the partnership and this is where the ethical line gets tested. One very common way agencies will increase their profits is through manipulating service costs. By tapping into technology platform tools, the agencies can raise costs as high as they'd like, many times 50-75% HIGHER than the true cost to purchase the media. The worst part is that they can mask this so you're entirely unaware. So how do you know if your agency is doing this? We're here to help shine a light and clear this up.
Ask Them
The first and best thing you can do is simply ask your agency if there are any other fees being charged on your campaigns and if they are raising media fees in any way. The best partnerships are based on trust. They will either dance around the question or provide you with a clear and concise answer.
Request Access to Technology Platforms
Any agency you work with should be willing to grant you access to their technology platform so you can see the costs, how the agency is running the campaign and if there are any potential issues. Although you shouldn't be expected to babysit your agency, it is always wise to check in every now and then to make sure things are being managed as you expect.
Review Reports
Ask the agency to provide you with weekly reports on your campaign status. Those reports should be sure to include the "Total Media Cost" and "Revenue" figures if your partner uses DoubleClick Bid Manager. In this case, Total Media Cost represents the price your agency paid for the media and Revenue includes any markups they add. This will help you understand if you're being charged additional fees outside of what you expected.
Still Have Questions?
Here at Trustworthy Digital we're committed to conducting business with the utmost integrity, honesty and transparency. If you have been getting the runaround from your current digital agency or have additional questions we'd be happy to help. Simply leave a comment below or fill out our contact form and we'll get back to you as soon as possible.