Wednesday, June 3, 2009

BAD's 20:20:20

Most agencies make money either by fees or commissions. With a fee, the client company and the agency decide on an hourly fee before beginning a project. With a commissioned project, the client and agency decide on a percentage that will be a proportion of the media cost (typically 15%), so at the end of the project the client receives a bill for media with the agency’s fee bundled in.

Big Agency Defectors (BAD) is a new agency in Santa Monica with a new way of billing that is neither fee nor commission. It’s called 20:20:20. Their website states:

Our process and fee structure is very straightforward and allows first-time clients to dip their toes into the water without making a major financial commitment. There are three phases of creative development, each with a bite-sized fee attached. We call it 20:20:20.

Phase 1 – we develop three creative routes for a fee of $20k.

Phase 2 – we blow out any one of these creative routes as TV scripts, print ads, outdoor, digital - or whatever else makes sense for the goals and the agreed budget - for a fee of $20k per route.

Phase 3 – for any ads produced we charge a 20% markup of production.

If you don’t want to move forward from one phase to the next, that’s no problem. At the very least you’ll have some fresh thinking about your brand. But we think you’ll like what you see and want to go further. Our fee structure rewards us for getting the ideas into production. This means doing great work right from the start.

I think about all the time I’ve put toward pitching a piece of business that resulted in nothing but burnt feelings and a drawer full of concepts I might hope to one day repurpose. If the agency had made $20k for a two-week pitch, it at least would have gone to a nicer summer party. 20:20:20 seems a great way for an agency to stop giving away so much for free.

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