Up-and-coming shops explore new business models
As traditional business models outlive their sell-by dates, the path to long-term success for smaller shops no longer runs solely through a Big Five holding group.
In today’s fickle market, legacy creative agencies are akin to dinosaurs: lumbering giants fighting over clients’ shrinking budgets while slowly making that all-important pivot to digital.
With anxious CMOs laser-focused on doing more for less, up-and-coming shops are exploring models outside the hourly billings that have governed this industry since the days of smoky, three-martini lunches.
“Ultimately the best, most effective work requires collaboration and trust. But many agency processes work directly against that,” said Chris Denny, founder and president of The Engine Is Red in Sonoma, Calif. “[So] we closed the agency two years ago on a Friday and reopened with a completely different workflow.”
In short, the agency dropped all contractual obligations and instead charge clients daily rates ranging from $700 for a media planner to $1,800 for a partner. The solution seems simple, but it also contradicts everything that makes the biggest advertising companies tick.
New York’s Joan Creative chose a different route by developing six packages that encompass popular services like brand strategy, social media management and broadcast work. “We’re selling deliverables versus time,” said CEO Lisa Clunie, noting these “buckets” are priced “based on what it typically takes for us to do that work.”
“Instead of thinking, ‘What are the bodies that make this project profitable?’ We think about who will make it amazing and really deliver it,” said Clunie, who claimed potential clients now ask about the model in almost every new business pitch.
Partners in Crime in San Francisco also offers “value-based pricing” that founder Stephen Goldblatt described as “almost like a project fee for the entire scope [that can be] split into phases with a separate cost associated with each.” Some smaller clients use equity in their own businesses to help pay for the agency’s services.
“[There’s] a sigh of relief from the CEO or CMO when they hear that we’re willing to share their risk,” Goldblatt said. “We want to do great work, but we’re no longer walking in with a preconceived notion of what’s right.”
“[There’s] a sigh of relief from the CEO or CMO when they hear that we’re willing to share their risk.”– Stephen Goldblatt founder, Partners in Crime
Beyond billing, these structures allow for a departure from the classic wait-and-see creative process. “We don’t go silent for two weeks [after the brief],” said The Engine Is Red lead account director Windy Swindt, noting that clients prefer to be involved from the conceptual stage. In Clunie’s words, that means “no more Don Draper big reveals.”
BETC L.A. circumvented tradition by embedding itself in the world of modern dance, working with ballet superstar Benjamin Millepied to develop a fitness platform powered by subscription fees and partnerships with as-yet-unnamed brands. Strategist Clarisse Lacarrau said her team plans to integrate clients into the user experience while giving their customers access to the platform, explaining, “If it’s a fashion brand, they [might] design the outfits for the dance workout.”
One common thread linking these agencies is their independence, because publicly traded holding companies don’t have the same flexibility. But are their models feasible in the long term?
BETC L.A. spent only $250,000 on its launch campaign, eschewing the standard fundraising process in favor of an investment from its parent company. And the key to its success lies in forming long-term partnerships at a time when many clients prefer project work. “We want strong relationships that can last for a while,” said Lacarrau.
Partners in Crime hires almost exclusively on a freelance basis. “We cast according to need,” Goldblatt said, and this approach helps the team “expand and contract” without relying too heavily on pitches to survive.
Clunie acknowledged a similar “ebb and flow” pattern in Joan’s work schedule, noting that the agency is still working to achieve equilibrium. “If you don’t change the structure,” she said, “you’re going to end up with the same issues even if you’re an interesting and new thinker in your own right.”
Clients, at least, remain interested. As Denny put it, “They’re only here because they want to be.”