As the barriers within marketing services begin to dissolve, and projects become all-encompassing, opportunities for collaboration between design groups and other agencies have increased. That opportunity might exist for a consultancy owned by a larger group to work with sister companies, or an independent design group to join forces with agencies they have worked with in the past. Increasingly, such teams of consultants are successfully winning work abroad and for multinational clients as they offer more clout. But such a combination might cause friction when it comes to settling fees.
Elizabeth Finn, managing director of Coleman Planet which is part of the Inter Public Group-owned Coleman Group, says the design subsidiaries work well together because they share a common goal. But, she acknowledges “those in looser associations might be in it for a fast buck”. She admits that for some projects the group might have to compromise if a budget for its part of the project has already been allocated, but, in general, fees are discussed between the groups involved. “Because we’re all part of the same group, it’s all negotiated on an amicable win-win basis,” she says, adding being part of the US-based group has enabled Coleman Planet to work on international projects with sister consultancies in Europe and New York. “We’re very open about our rates and what we want to get out of a project. We’ll sit down with another design subsidiary and compare fees and sometimes they say ‘you can charge much more than that’ in a particular market,” she says.
Sam Sampson, chief executive officer of identity and design at WPP, advises design groups he oversees to work out fees based on time costs at the outset and not to deviate from that, although there is no formal WPP policy on how subsidiaries collaborate. “They have to estimate the split of fees between the parties. It’s hard to figure out how long a job’s going to take, but for joint ventures more often than not you’ll want to freeze your prices even if you over-run,” he says.
He advises them to “be tough and walk away” if they are under pressure to work at a discount as part of a cross-referral within the group. “There may be cases where the client plays one group against another. When you’re in demand there’s no reason to cut your prices. It’s the beginning of the end if you do work for less than it’s worth.”
John Lloyd, director at Lloyd Northover Citigate, says LNC is “increasingly pitching with other companies within the Citigate group to offer an integrated service”, where clients can either buy the package or individual services. But he stresses: “Although we’re flexible, we do have rates that we try to stick to and avoid supplying a commodity that someone working from home with a Mac could do.” Pitches with sister companies are usually free and while Lloyd Northover Citigate refuses to provide unpaid creative work, that’s not the case for the advertising subsidiaries where free creative pitches are more the norm.
“We’re all very open about fees and always agree them in advance and define at the outset what each stage will cost. But sometimes things can run away with themselves and you can’t go back for more,” Lloyd says. There are also occasions where a sister company might ask it to complete a design project for less than it might usually charge. “If it’s handed on a plate we take into account that we haven’t had to spend out on new business,” he says.
But, for Lloyd, a major benefit of collaborative projects is being able to produce results which are more measurable when working jointly with subsidiary companies. “It makes an identity project more tangible,” he says.
Always negotiate the split of fees at the start of a project and be open about charge-out rates
Know what your charges and profit margins are and stick to them
Don’t put in surprise charges without prior agreement with both the client and other groups in the team
Weigh up the pros and cons of taking on cross-referral projects at competitive rates or set fees – the saving on new business expenses might make projects more profitable, but it can be difficult to say no in the future
Use links within a parent group to gauge market rates in unfamiliar areas or locations
Don’t be afraid to ask other groups how they work out fee levels for collaborative projects.