How agencies hide the real cost of their creative output & how to move beyond the bespoke creative bubble.

It is an open secret that almost every large advertising agency out there at some time or the other has underpriced the cost of its bespoke creativity. Surely not you say. Don’t agencies already ridiculously overcharge? Unfortunately, not. Here is a case for the true cost of creativity.

By and large agencies have traditionally operated either on a retainer model or on an ad-hoc project model. At the most basic level, the cost of creativity is derived from an hour cost combined with expertise cost. When I talk about the cost of creativity here, I am referring to primarily the cost of conceptualization of a creative idea and strategy, more than the cost of technical production – especially when said production needs to use external vendors. That is another story for another day.  

In a perfect operational model, the bulk of the hour work is done by junior creatives and refined further by seniors up the ladder who invest fewer hours. Their role is to deliver critical feedback and keep the work on track. The costing behind the model falls flat if seniors must pull a hail Mary and do all the work themselves. Correctly estimating the hour allocation before a project kicks off is an art. An agency’s profitability, in an overly simplistic way of putting it, depends on ensuring that the number of hours worked on do not exceed that which is costed for in the signed off estimate. There are three common hurdles that cause a mismatch to happen.

Firstly, the agency didn’t clearly understand what the client was asking for in the first place. As a result, it mis-judged the effort it would take to bring the project to fruition. Second the client kept changing the scope of work. This may be shifting goal posts or a form of scope creep – tacking on to the existing scope as the project evolved and new requirements were realised. Third, the output of the agency is subpar and needs rework. Now I’m sure the bean counters add a healthy safety margin in their cost estimates to protect against these. What percentage that really is, I can’t quite tell with certainty.  

How much the work really costs depends on the agency rate card. Which is arrived at by adding the typical hours spent on a creative task along with amounts to cover agency operational costs and overheads. A rate card is a well-kept secret. A bible of costs vs effort for both agency stakeholders and clients. Sometimes each client earns their own rate card within an agency, depending on the nature of the business and the time it has associated itself with an agency. Think of the rate card like a food menu that a client or an agency person can refer to quickly to understand how much a creative dish may cost.

With me so far? Great!

So how do agencies hide the cost of creativity? The most common trick is by pressurizing everyone involved in a creative process to underbill their hours. And this includes any team that supports them too, like account management. Yes, you got that right, it all boils down to how honestly everyone does that one task everyone truly hates. Timesheets.

In its defence if you have a rate card you need to have a timesheet. It is purely logical. It is a system of checks and balances to ensure that profitability is being maintained and teams are on track. Which is why agencies will never be able to do away with them. What they could do though is have an efficient timesheet system like the one delivered by clockify. Do check it out if you are struggling with a timesheet. I’ve used this as a freelancer and it’s an amazing to track the time spent on a project. But I digress.   

In all fairness not all agencies pressurise creatives to manipulate their timesheets. Or at least they don’t do this overtly as it might lead to a creative uprising and a call to abolish timesheets altogether by the creative folk. Yet it isn’t uncommon to hear business heads or project managers tell their teams to not exceed hours and pass the word on. This puts creative teams between a rock and a hard place. Do you optimise your creative output for the hours you are actually billing, or do you go all out and pour your heart and soul into a piece of work, hours be dammed? The answer is often a balancing act in creativity and managing expectations. The truth is, as you read this article, there’s a creative slumped in front of a computer burning midnight oil on undocumented hours coming up with a creative idea that just might re-write the story of a brand tomorrow. And the tragedy is that they won’t be able to put down those extra hours of hard work on their timesheets. Such creative success stories will become urban legends in Ad Land. Spotting these creative anomalies is easy. If everyone is giving you a standardized timesheet week on week billing 8 to 9 hours every day you can rest assured that it’s not actually capturing the accurate time spent on projects. Real life has variation, and we need to accept this if we want to move forward.

Don’t get me wrong the opposite is also true. You can only sweep only so many hours under the carpet till the truth comes out. Let’s say you have a cantankerous client and you aren’t able to deliver to your client’s satisfaction and have a high strike record. The amount of rework that ensues will ensure that the cost of the creative output for what clients might regard as “just a jpeg for a social media post” will be atrocious. Agencies will have to eventually write off some of those hours they put in. Hence lowering the actual cost of creative output to the client’s benefit. I’ve heard of this happening first-hand.

So why talk about this right now? What makes the subsidized cost of creativity a real problem is when agency folk due to life choices or a global pandemic decide to have to sell their services individually on a freelance basis. The true cost of their creativity goes head-to-head with their subsidized cost of creativity that they had been doling out inside the hallowed halls of agencies. This accounts for quite a mismatch. Individuals cannot absorb costs like agencies can. Nor should they be expected too. The safety of an agency pay cheque often makes employees forget that by underbilling their hours and manipulating their timesheet while working within an agency, they have effectively reduced their hour cost. Some of this gets offset by a yearly bonus. But not enough. By ensuring time and effort targets are met, someone up the chain can claim that they are hitting their profitability targets.  What we fail to neglect is that in reality, as creatives, we’ve cheapened the cost of the creative output. It’s truly a dog-eat-dog world.  

Still there are some people, stalwarts in Ad Land who dare to stand out of the crowd. Regardless of internal pressures they claim to actually bill the hours that they work on. Kudos to them. They are often able to pull this off because of their seniority and the time they’ve spent in an agency.  

Why consultancies are a concern to creativity

How does this tale end? A truly artificial bubble of creativity waiting to be popped? Will the pandemic make a difference? Time will tell. Don’t forget that the consulting companies are just waiting to cash in on this. Sure they’ve been buying up award winning agencies as a start. While we might think that consulting companies only sniff out the big bucks like sharks in water, you can bet that they are developing a nose for creativity too.  

I wouldn’t be surprised if consulting companies having understood this fundamental costing flaw and countered it with a strategy to flank creative agencies by creating large creative machinery behemoths with a model that delivers production line economies of scale. Like what Ford did with the automobile. Some of these companies churn creative work across multiple markets across time zones. The work literally doesn’t stop 24/7 and uses cost efficiencies derived across different markets to their benefit. Work is handed over from one creative team to another, following the sun. This not only reduces costs but increases the speed in which creative work happens. The critical difference is their attitude towards the ownership of the creative work being produced.  People aren’t bickering about who owns the idea, but how fast it gets pushed out.

Let’s not forget a consulting company has a very different brand image compared to a typical agency. And it is this that the company uses to its advantage as it snaps at the heels of agency creativity and the associated costs. Consultancy companies don’t just poach the agency pot, they attract clientele that will never walk into a traditional advertising agency in the first place. And they charge premiums for this.  

Agencies on the other hand have for too long positioned themselves as the only true saviours of bespoke creativity. The last bastion where costly original ideas are crafted to solve client’s problems with creative pixie dust. Creativity is the bread and butter for Ad Land – the idea industry. Agencies help build wheels, consultancies churn out automobiles. Or so we would like to believe.

Beyond the bespoke creativity bubble. Rethinking creative output.

Let’s not even begin to pretend that all creative output needs to be built or costed equally.

Today as consultancies and agencies go to war, in the middle of the pandemic we saw an army of out-of-work creatives make a market for themselves. These are agency folk who know how to ferret out the best creative freelance resources that have been curated for individual creators and sold in creative marketplaces and use them to solve their client’s need in creative manners. A wide range of creative resources from PowerPoint templates, video animations, social media posts, emailers, newsletters and even full-fledged web-designs to name just a few that can be purchased straight from creative marketplaces like Envato. If you aren’t buying complete off-the-shelf solutions you have the option to buy the raw ingredients too. From stock video footage to sound clips, 3D models, everything is available online already in different competing asset marketplaces.

The pandemic has also seen a flurry of newly minted entrepreneurs and new out-of-home businesses. There are several small enterprises that would love to tap the expertise of big-name agency bred creative thinking, but at lower costs. They are incredibly open to starting their communications with a templatised design, but they need someone to do the work of customising templates and defining a brand voice for them. This is why it’s time to look beyond the traditional bespoke creative model and take a cue out of the old adage, to steal like an artist. Freelance creatives can address this gap by tapping into these creative resource marketplaces as the starting point and marry it with their agency honed expertise to tell start-up brand stories effectively. Truth be told I’ve spotted one large sports brand which has probably borrowed a template or two for their Instagram stories. There is no shame in it. You can easily tailor these assets to match your brand style, its likely that the end consumer wouldn’t be able to pick from a line-up which creative was born from a template and which was created from scratch.  

How is this connected to the cost of creativity you are wondering? As individual creators and in-house teams create fantastic looking content quickly by buying and customising off the shelf templates and designs from these platforms, they are substantially reducing their individual hour cost by offsetting this with the cost of the creative template purchased. Heresy I hear the whispers of the agency creative folk. Yet you know that this kind of approach to creativity is probably being favoured by in-house communications teams already. This is why Canva is popular in the first place. Place It and Canva aims at offering interactive web experiences to customise the creative output. Cutting the cost of proprietary creative software installed on desktops. The gap however is that while there are such easy-to-use services, clients may not have the appetite or time to dip their toes into using the software. Their lack of expertise would literally rake up excessive hours that will be tagged onto the creative cost.

How does this approach effect the cost of creativity?

I believe that the benefit of this approach, is it fixes the cost of a certain amount of the creative effort. These assets are sold either at fixed cost or on an all you can eat subscription model. Which means this cost is fixed and freelancers or agencies then slap on their hour cost. Yes, there is no way from moving away from that.

Remember it does take exceptional creative talent to create assets that are judged by peer review and sold on these creative marketplaces in the first place. So, think twice before you dismiss these assets as it reduces the time for producing the creative idea from scratch. It ensures that the creative output is keeping with the times from a design aesthetic. It might even give more time to the creatives to finessing the communication aspect of the product they are developing!

This approach is perfect for filler content and key seasonal communication messages that need to be pushed out by brands quickly. But I think a brave brand will approach doing larger campaigns with this approach too. Just because of the sheer number of customisable creative assets sold together. It is also good to point out that often templates are picked after a creative thinks of a communication idea and strategy. The idea is then fitted to a template available. Not the other way round. So, it doesn’t really dilute the big thinking behind the execution.

Agencies will evolve with this model too in their offerings to clients. Using these marketplaces to source the building blocks of their creative output. And pass the cost savings to the clients as they focus on delivering cutting edge creative ideas within this space. They are already using this way of working when it comes to using stock photography instead of a photography shoot. Just like using stock photography, to make this work, clients will need to understand the boundary of what can be done within the template chosen. They should sign off initially on the template, eliminating the potential for scope creep and fixing costs.

To end I’d just like to say that yes this approach, by no means, is a magic bullet in correcting a culture of downplaying the cost of creativity. Rather this is the first step in triaging a larger problem. Agencies really need to focus on pushing premiums for their creative work. Justifying it with tangible real-world results. But they also need to discover new cost efficiencies that are offered by purchasing through creative marketplaces and they need their client’s approval to do this. Freelancers and in-house teams need to sell in this new model of doing creative work to bridge the cost gap. Individual creators who contribute to these marketplaces will reap the benefits. In the end more money will be made doing better creative work. Hopefully.