If you’re a marketing leader in the process of hiring a marketing agency, but you’re not sure what type of contract you want to sign, think about the points in this article before making your choice.

Marketers spend too much time wondering if they are being burned by their marketing agency. But as someone who has worked in an agency for 13 years, I can tell you that marketing leaders are the ones who have the most influence on this. It’s about communicating.

Business relationships usually fail because of a lack of communication, not a lack of results. So even if you select a creative agency with a great reputation and capable of producing exactly what you are looking for on time, it doesn’t always translate into a great working relationship.

If you think the agency you’ve hired doesn’t understand your business and therefore is a bad partner, don’t rush to judge: the blame isn’t solely on them. Like all business partnerships, labor agency relationships are a two-way street.

You have hired the agency, so your neck is on the line to maintain the reputation of this agency. You’ve also paid the agency to work for you, and you don’t want to blow your budget. So go the extra mile and communicate effectively. This will help you get the most out of your money while respecting the agency’s creative reputation.

Hiring a marketing agency starts with your KPIs

Your goal and KPI-based Statement of Work (SOW) should be aligned. You should understand each of your KPIs and have objectives associated with each before hire a marketing agency.

As a leader in internal marketing, it’s your job to know exactly what you expect from an agency before signing up, while making sure that your SOW is flexible enough to include expert suggestions from the agency you are trying to work with.

When you join an agency, ask questions and listen carefully to see if the agency can accomplish what you need.

Identify the following before you even contact an agency:

  • Marketing benchmarks relevant to the project or objective (traffic, CPA, close rate, etc.)
  • A fixed budget
  • What will a successful partnership look like in 12 months?
  • A dashboard of essential factors for your organization to reference when hiring an agency (performance, reliability, cost, contract duration, etc.)

Should your contract measure hours, deliverables, or goals?

As you speak with agencies, they will share their preferred method of accountability: hours, deliverables, or goals.

When hiring a marketing agency, consider that you need to work with the strengths of the agency while staying aligned with your own situation:

  • An hourly contract generally works for small budgets and businesses that want to test the waters with an agency.
  • Deliverables make sense if you have the skills but not the resources to get the job done.
  • And goal-based agreements work for companies looking for solid results and a creative partner.

When you understand the nuances and benefits of each scenario, you can determine which situation will be most beneficial for your agency relationship.

1. Hourly rate contracts

Hourly contracts are great if the agency you work with provides you with a quick feedback mechanism for hours spent; otherwise, it can be quite easy to go over budget.

If you need quality work done on time and find an agency that has a reputation for doing this kind of work on an hourly basis, you might benefit from this type of deal.

Hourly contracts can also be useful for smaller scale projects where you need additional help to achieve a clearly defined goal.

Keep in mind, however, that agencies hired for hourly work are generally not held accountable for results.

2. Contracts based on deliverables

If you want the agency you hire to be responsible for the tactics and results of a project, you can opt for a deliverable-based contract.

These contracts can be attractive when bandwidth is your main concern. If the job you need is the kind of work you normally oversee in your business but need some extra creative firepower, or you’re short on time and need a little more “punch” to get you across the finish line, consider a contract-based deliverable.

Another reason for signing a contract based on deliverables may be that your team doesn’t have enough historical data to create a reasonable goal. So you’re just looking to complete the project on time and on budget.

However, projects based on deliverables are often less likely to be successful because the agency is required to deliver on a project basis, without fitting in as part of your team or helping to drive your marketing strategy as a whole.

3. Contracts based on objectives

Goal-based contracts are usually the path to lasting success. They allow agencies to have more skin in the game.

That said, objective contracts are almost always more expensive but almost always more to success than contracts based on deliverables. Goal-based arrangements are great if you’re taking your marketing to new ground and therefore want to partner with an outside agency to develop a new strategy from scratch.

If you’re looking for a partnership where you and the agency share responsibility for strategy and results, consider a goal-based contract.

Goal-based contracts are also beneficial if results and partnership are high on your agenda, and you’re looking to rely on a trusted source of historical data to target new or established goals.

Think of this relationship as taking input from an outside but equal department within your business to drive growth. When you sign the contract, you are forming a partnership.

Communicate your needs, set measurable goals and prioritize feedback

By communicating your goals up front, you will always get the best results. You wouldn’t go to a barber and just say “Go ahead”, so why would you license an agency so much?

The best way to get the most out of partnering with an agency is to treat the agency like you would your own team members.

Whether the partnership is short or long term, it is recommended that you make sure that the agency you hire is always very aware of where your business is going. Better communication means better creative work.

More resources on hiring a marketing agency

Six Tips for Getting the Most Out of Your Marketing Agency

10 questions to ask when interviewing your next B2B digital marketing agency

Digital Marketing Outsourcing: Your Questions Answered [Infographic]


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