We’ve had some fascinating discussions recently with clients and prospective clients. Because of some of those conversations, we’re starting a new series of posts:
The Top 10 Questions You Must Ask Your Agency (or Consultant)!
If you use a consultant or an agency to help with your fundraising or marketing you have to ask these 10 questions…and be happy with the answers you hear back.
Our buddy Jason Alba is running a series of 10 posts on his blog, but the clever guy that he is, he isn’t doing his list in numeric order. Hey, we believe in learning from smart people, so, we’ll do the same.
Number 3 on the list of Top 10 Questions You Must Ask Your Agency:
“What are all the ways you receive or could receive financial benefit or gain because of your work for us? Please include any current or potential commissions, finder’s fees, bonuses and spifs.”
Note: we aren’t saying that anyone or any agency is operating unethically. We’re not saying that any of the ways we describe are wrong. We’re not even saying that these are the only ways agencies or consultants receive financial benefit.
We are saying that a client needs to know everything up front.
For example, you should know if your agency or consultant is making money on the printing they do for you. Commissions are very common in the agency world. We only know of one regular agency that doesn’t accept commissions. Oneicity doesn’t accept any commissions but then we’re not a regular or traditional agency anyway.
One important consideration, if your fundraising consultant is making money on every piece of mail or printing they do for you… do you think it will be easy or natural for them to ever say “let’s mail fewer pieces?” If a company has built its income on commissions from your printing, they have a reason to keep printing more… and more… and more… regardless of what is best for you.
One clue that you’re paying commissions is if you don’t pay printer invoices. If the agency or consultant bills you for printing, you probably can bet you’re paying a commission.
Alarm bells should go off for you if the agency or consultant owns the printing company they use. YIKES. At the very least insist on competitive bidding so you know you really are getting good pricing. (Please, no hot emails from our agency friends, we’re just saying disclosure is good for everyone, OK?)
What if you’re in a syndication program? That’s sort of like a commission structure and sort of not. Bottom line: as long as you know how the agency makes its money–by printing more and more and more mail pieces for you (I guess that was a little bias showing) then OK. Just understand how the economics of syndication work.
Also, there is the interesting phenomenon of referral payments. Here’s how it works. Company X refers their Client to Service Company Y. Service Company Y has agreed to pay 5% (or whatever) for every referral. Again, there isn’t anything necessarily wrong with this, we just think you need to know that Company X made 5% from Company Y.
A referral should be based on what is best for you as the client. That should be the only consideration. There should be no hidden financial gain for a referral. If you ask for help choosing a service, you should at least know that the company recommending a service to you is receiving a payment for that referral. That might not change your opinion of the referral, but it might be nice to know, right?
The whole point is for you to know exactly what everything costs. If you are doing direct mail, one of the key components to meaningful analysis is to know the real costs–of everything–and to evaluate if there were more efficient options. It really is all about net income!
So, ask your agency or consultant about all the ways they make money from you as a client and get a firm commitment from them that they will disclose to you any time they receive a commission or bonus.
Ask for complete and 100% transparency. That’s what you deserve.
Stay tuned on Fridays for more of the Top 10 Questions You Must Ask Your Agency…(or consultant).
In the meantime, love to hear your thoughts.
(photo credits: aymlis)