Perhaps an appropriate follow-up question to, “How do retainers work?” is “DO retainers work?” Simultaneously, you should strategically and purposefully look at how retainers can help your business grow.
Retainers are absolutely the best pricing structure in certain situations. Let’s take a deeper dive into when to discuss these types of agreements with your clients.
What is a Retainer?
A retainer fee is a mutually agreed upon, upfront cost of a service. It is a fee a client pays in advance for outlined services performed during a set number of hours. This pricing structure is increasingly popular with digital agencies, particularly boutique shops.
While we typically recommend project-based pricing, as many as 35% of agencies indicated in the 2021 Digital Marketing Agency Outlook survey that the retainer fee model is their go-to pricing structure. In the following sections, we’ll explore why.
Are Retainers Right for Everyone?
This question is tricky. Digital agencies should deploy varied revenue-generating and pricing approaches to ensure steady cash flow. Retainers are one of the most obvious ways to maintain a healthy revenue stream. You should limit long-term retainer contracts to clients you have an established relationship with who understand the value you provide. Prematurely establishing a retainer contract could lead to miscommunication and an ugly breakup down the line.
Once your agency/client relationship graduates to a retainer, you can begin to see exponential growth that is mutually beneficial.
Retainers benefit agencies through:
- Guaranteed Revenue. Digital agencies widely use the retainer fee price structure because payment occurs at the same time every month. Retainer-based clients provide a steady, consistent pipeline of work that serves as a baseline for monthly income.
- Deep Understanding of Clients. Retainers create long-term, trusting relationships that enable you to partner in your client’s success. You become comfortable with their branding, goals, and objectives, which allows for increased productivity.
- Unlocks Creativity and Innovation. The comfort level retainers provide leads to increased intelligent risk-taking. You and your team invest in your client’s strategic planning and growth goals. So you can suggest industry best practices and innovative solutions that can move them forward.
- Better Strategic Planning and Workflow. Managers can project retainer work for several months out. This planning helps efficiently allocate your team’s time and lets you determine if your pipeline can handle more work. The steady stream of projects enables you to decide whether you should scale or if you’re where you want to be.
Retainers benefit clients with:
- Financial Predictability. Clients gravitate toward retainer agreements because they make budgeting easy. They know what they pay each month and can shape their marketing plan around that sum. It takes the guesswork out of their marketing expenditures.
- Priority Access. The long-term relationship with retainer clients causes your team to fully invest in their success. The can-do spirit that frequently accompanies these partnerships typically leads to quick access to your team and expedited turnaround times.
- Consistently Better Content. You know your retainer clients’ brand, tone, and goals. You are familiar with where they are going and how they want to get there. This history and background knowledge helps you get the content right the first time.
- Creative Breakthroughs. Because you know your client so well, your team can experiment with different ideas that might help them get to the next level. Retainer partnerships can lead to creative solutions and breakthrough messaging. These revelations happen because people with different perspectives work toward the same goals.
Keys to Making Retainers Work for Your Agency
If the retainer fee structure resonates with you, make sure to think your agreements through completely.
To get the best possible outcome, consider these industry best practices:
- Clearly Outline Goals and Expectations. What does your client need, and what services could be a solution? Your agreement should articulate how you can provide marketing continuity and reliability while mitigating budget concerns. This agreement could help your clients’ marketing and finance departments get on the same page!
- Don’t Micromanage Hours. Be flexible if you occasionally exceed budgeted time. Remember, you are investing in the relationship for the long term.
- Time Tracking is Still Essential. Time tracking is still important even though your team is not billing by the hour. To make sure your retainer contract makes sense financially and scope creep isn’t happening, produce detailed reports of monthly time allocation.
How Do Retainers Work? Promethean Research Can Help
A retainer contract can be beneficial to your digital agency and your clients. For more information on the best way to structure your retainers, contact Promethean Research today. We are ready to help you use data-based decision-making to reach your goals.