by Matthew Schwartz, Editorial Director
Lucy Siegel, executive VP of Bridge Global Strategies, a Didit company, recently took the pulse of the heads of 25 smaller U.S. PR firms to get a sense of how agencies are charging their clients. Combined with insights from Gould + Partners’ surveys, the data shows that smaller firms are the biggest users of flat fee arrangements while larger agencies capture and bill all the employee hours. But that all could be changing.
Below is an excerpt from Siegel’s original blog post.
Lucy Siegel, executive VP of Bridge Global Strategies, says the structure of agency fees may be about to change. A flat fee. This could be a monthly flat fee for ongoing PR or a set fee for a particular ad hoc project. Agencies try to anticipate the amount of time that the monthly or project work will take and base the fee accordingly. Even if the work takes more or less time than estimated, the fee is the same. This is a very traditional method of charging for PR. However, some of my colleagues at other agencies have a philosophy that some services are worth a lot more than the time it takes to provide them. For example, suppose a client has had a big communications problem with shareholders or its community for a long time, and asks its PR agency to give some thought to how the problem could be solved. If some creative genius at the PR agency is able to develop a brilliant solution, even if it came to the PR professional in a dream one night and didn’t take any time at all, some agencies feel they should charge a flat fee commensurate with the very high value of the work.
- Hourly fees. Another business model is charging for time spent by agency staff, based on hourly rates assigned to staff according to their level of experience and expertise. Sometimes agencies will bill a “blended rate” for all staff hours spent, based on an estimate of the number of hours people at various fee levels within the agency will spend on work for a client. Our agency’s rates range from $75/hour to $325/hour, and we may bill our clients flat rates of $190, $200, $225 or more per hour, depending on the amount of time senior-level staff will need to devote to the work.
- Pay for performance. Using this method, the agency only charges for actual media coverage. This may sound good in theory, but it’s the least popular method of charging for PR, for good reasons. First, the few agencies that charge this way tend to have a short-term focus. Working on a story with a reporter from a major national media outlet can take many hours and months of elapsed time. For an agency that’s paid for quantity of coverage, it’s not worth it to go after these difficult targets. Compared to national media with very large audiences, it’s a lot less time-consuming to score coverage in local media outlets (a local business publication or radio station, for example) or some very narrow media outlets (publications for chefs, travel agents, hoteliers, or owners of Boston terriers, for example.