Retainer vs Project Fee: How Should You Structure an Agency Agreement?

May 9, 2022

Project-based Fee Structure vs. Monthly Retainer

If you’re a new client, working with an agency for the first time, one of the first questions you might be asking is how to structure your agreement: retainer versus project-based fees.

There is no one size fits all approach at COHN. We customize each agency agreement to fit both the needs of the client and the agency. It’s important to us that we approach our client relationships as customized solutions, rather than a standard set of services.

What are the options and what are the benefits of each?

By definition a project-based fee structure is where a client pays an agency for a defined amount of time to produce a specific deliverable or to undertake a specific project. A retainer is a set amount of money to secure an agency’s time and a team of people / agency services, for a set number of hours or days each month.

Project-based model Fee Structure
Projects that have a defined scope and set of deliverables within a defined timeline are the best scenario for a fixed fee structure. This is typically used for one-time types of projects that have a clear start and stop. For COHN, our brand development, strategic planning and website projects are typically done as project-based agreements.

Project-based Pros

  • Defined set of deliverables and scope of services with a defined timeline or due date.
  • Opportunity for clients to “test” the agency on a single project before committing to a longer term partnership.
  • Allows agency to create the strategy based on the clients needs and budgets and then create a long-term approach for implementation that is often executed via a retainer agreement that meets both objectives and the client budget parameters and is based on a plan vs. being vague.

Project-based Cons

  • Project fees can be more expensive and may be value based / fixed price and not always negotiable.
  • Each project requires its own, separate Statement of Work .
  • Up front / one time costs can sometimes be cost-prohibitive for some clients and can’t be spread out over the course of a year like a retainer.
  • Puts more pressure on the agency to execute vs being able to manage and predict workload.

Marketing Agency Retainers
Retainers work well for clients that have ongoing, consistent agency needs. Retainers are the best way to hold on to relationships over time and help agencies be seen as partners rather than vendors. It allows the agency to become more deeply involved and invested in the clients’ business and ongoing needs vs just doing a single project.

A retainer agreement is typically set up as an annual agreement, or six months at a minimum. Retainer projects and needs don’t always have a defined start and stop. They are typically used for agency services that have monthly recurring needs, such as ongoing creative services to support media plan fulfillment, social media community management, SEO, Public Relations, website maintenance.

Retainers can oftentimes be perceived as a vague “bucket of hours’ or having access to the “all you can eat buffet” of agency services. It’s important to map out retainer goals and priorities each month, even at a high level to ensure alignment on which projects the agency is going to focus on to ensure that they can be accomplished with the parameters and budget of the retainer. Allows for ebbs and flows of needs throughout the course of the agreement.

Retainer structures allow clients to evenly spread out billing and establish a set monthly budget amount. They also help agencies with cash flow and consistency with income. Agencies will sometimes offer blended agency rates or even discounted hourly rates when a retainer is established.

Retainer Pros

  • Customized to fit client needs and agency services (can be single service, e.g., website maintenance or social media community management, or could be fully integrated to include all agency services).
  • Agencies oftentimes will discount their hourly rates to secure a longer term agreement.
  • Consistent budget on a monthly basis.
  • Don’t have create new SOWs every time a project pops up.
  • Allows for ebbs and flows in workload; can utilize various agency services when / as needed.

Retainer Cons

  • Can be confusing when integrated agency services are all pulling from the same budget.
  • Might have to prioritize projects to future months due to budget constraints.

What’s the right solution for me?
As stated before, all of our clients are unique and have customized agreements to fit their individual needs. COHN clients are an even mix between project-fee based and retainer agreements. Many of our client partnerships begin with developing the brand foundation for our clients, including research, brand strategy and expression along with strategic planning. Once the foundational project work is complete, we then transition to retainers to support the ongoing needs and implementation of the strategic plan.

Statements of Work (SOW) are all about creating the most efficient and easily understandable agreement with the client to keep the relationship healthy and projects moving smoothly. If you are looking for an agency that will always put the client first, connect with COHN today and we can start elevating your brand!

What’s the Purpose of a Statement of Work (SOW)?