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AE College: Spring

Over-serviced Retainers - having "the talk"

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7 posts
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Lisa Kemerer
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We have a couple clients that are on retainer who have continuously been over-serviced. This was ok on a few things, but now it's become a big issue and revenue loss. There have been no prior conversation from the account rep to the client of the issue. It's now a big issue and i need to have a budget discussion.

Has anyone dealt with this and who may have advise on the best way to approach?

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Bria Wheeler
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Hi Lisa,

Our agency had similar issues with various types of retainers in the past. It was a hard battle, but we've been able to get a much better handle on things and have definitely seen our revenue improve for that reason. Since the account rep has the relationship with the client, I'd recommend asking him/her to handle that conversation since they've already built the trust and mutual respect with said client. In addressing this with the client, the way I see it is that you have a few options (assuming your retainers are structured like ours, in that the client retains a certain amount of hours each month at an agreed upon monthly retainer fee, and you provide services within those allocated hours): 1) Let the client know that you'd be happy to continue working on projects/needs beyond the amount of time allocated each month if you can bill them hourly for overages once the retainer threshold is met 2) Let the client know you will alert them when they are close to running out of retained time for the month so they can prioritize their requests that fit within the amount of hours left 3) Offer to increase their retainer to accommodate the growing requests [it's a great idea to have data handy for this one so you can show them how much "extra" you've been giving them each month] 4) Get more stringent on what you allow within a retainer to identify bigger projects that should be estimated separately.

If your retainers are structured differently (i.e. you promise the client a certain amount of work, number of deliverables, results, etc. as opposed to just retaining a certain number of hours to work within), you may want to take a look at your retainers and consider either going up on your retainer rates OR providing less services/deliverables for that fee OR a combination of both.

I hope this helps, and I'd be happy to discuss further if you'd like - I know what a pain and a business challenge this can be!

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Lisa Kemerer
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Thanks Bria - Appreciate the post. Sounds like we have similar retainer setup. I'm just starting the battle but these are some great tips - thank you!

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Larry Meador - ceo at evok advertising
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Remember, it's a lot easier to plug a drip than it it a flood. Nip it in the bud quickly - when a client exceeds hours on a retainer, assuming its scope creep or additional projects and not an internal efficiency issue, that's a good thing - means there is more work than anticipated. Try to determine if its a short-term issue or a long-term dilemma, but in either case, approach the subject with your client as a partner - I'm sure you want them to be successful, but to ensure you have a strong leg to stand on to limit hours, prioritize projects etc., please make sure the client feels they are receiving value for all the hours they are being charged. In our system, we have UB (unbillable) codes for each type of task, and ultimately, we leave it up to our account managers if they want to UB a task/charge - they will have to explain the client's hourly rate in their quarterly meeting anyway.

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Revel
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With our retainers, we include a big block of hours good for any service, so changes are not an issue. We track and report our time each month and charge one amount each month for 12 months. This eliminates scope creep. We keep them posted when they get 85% used up and determine if they need to re-up the block of hours, or if they prefer for us to just bill time and materials as we go, should we exceed the block of hours. We've successfully trained our team to NOT do any work without having and agreement in place. Hope this helps!

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Lisa Kemerer
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Thanks Larry  - We have some codes specific to task which help underatnd what's being done. It's been more an issue of the account manager not having frequent convos with the client and monitoring the effort against the work.

Revel - we are invoicing the same amount per month with a 50hr block to cover whatever work is needed. Some months are "light" but most have been consistently over.

The conversations so far have been positive - thanks for the advice.

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DebB_SW
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You should always address over/under-use of retainer hours in your retainer agreement, by setting a floor and ceiling within which you'll operate. Here is a sample compensation plan describing a simple retainer arrangement.

https://www.secondwindonline.com/a-sample-no-nonsense-compensation-plan

As others have recommended, track client use of allotted hours, whether under a full-service retainer, or a project retainer; notify clients when they approach the monthly "ceiling"; and notify them in writing when you shift from retainer to add-on hourly rate billing. Careful management of project scope is also critical to keeping a handle on retainer use. Adjust your blended agency rate if the over-use becomes a habit, to cover the regular add-on hours... but discuss the change with the client before you adjust the rate. If the client pushes back (as many will), the principal should step into the conversation, going with the AE to meet with the the client. Make sure any changes to the original agreement are approved in writing by the client.

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