Are you being overcharged? Would you know if you were? Tom Sadler lays out five simple questions for brands to to ensure they’re getting the best out of their agencies.

Plenty has been written about the erosion of agency margins – with the blame attributed to the tightening squeeze from procurement departments, the client trend to bring various services in-house and the arrival of consultancies into the sector.

We all understand the pressure of running a business in such a challenging environment, but charging clients hidden fees is never an acceptable way to improve profit margins.

Having worked on both agency and publisher side during my career, I can think of a number of times when I felt uncomfortable about how a client was being charged.

I have seen thousands of media plans and end-of-campaign reports from tens of agencies, and these are some key factors that clients should be looking out for to avoid getting ripped off by their digital agency.

1. What’s the real cost of ad serving?

I recently saw an ad serving plan from another agency in which the client was being charged $1 CPM for ad serving. By comparison, we’re a small agency and we pay sub $0.15 CPM.

So on a campaign that has five million impressions the actual cost is around $750, but the unnamed agency is charging $5000. I understand that the agency wants to recoup the time spent trafficking the campaign, but nothing can justify a mark up of more than 500%!

2. What media is your agency buying?

The gap between what agencies are paying publishers and charging clients is massive. This applies not only to the media, but also the data that is being on-sold. Your agency should be transparent with you regarding which media is being bought and where it is being placed. Without this information, it’s impossible to make an educated decision on how and where your advertising budget should be spent.

3. Is your agency eliminating double-counting?

All of your digital marketing results should be reported out of a single source of truth – for example, Google Analytics or Omniture. This ensures conversions are de-duplicated.

I have lost track of the number of times agencies have reported from individual channels, leading to massive over-reporting of conversions. While the free version of Google Analytics operates on a last-click attribution model, you will gain a more accurate picture by using the attribution tools within it that allow the comparison between various models.

4. Are all conversions equal?

If your agency is allocating the same value to a post-impression conversion as a post-click conversion, you have a problem. Post-impression conversions definitely have a place in the conversion funnel, but there is no way that a user scrolling past a banner should have the same conversion value as a user who has clicked an ad.

5. How many hours is your agency spending on your account?

Agency fees should be based upon the amount of hours spent on your account, not just your advertising spend. Does your agency report back to you on how many hours have been spent on your account every month? If not, it should do.

From an agency perspective, it’s our responsibility to ensure our clients understand the true cost and value of the work we are doing for them. If you’re not already, we should all be having honest conversations with clients about the time tasks take and the value those tasks are driving to our clients’ bottom line.

Tom Sadler is co-founder and director of sales and marketing at Indago Digital

Further Reading:

• Your agency could be breaking privacy laws – spotting the signs and how to respond »
• The usual suspects – simplifying your agency roster and the specialist myth »
• Model mania – Ogilvy director on reconsidering your agency relationships »

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