Campaign – Retainer contracts, where agencies are signed up to deliver creative and media services in the long term, has steadily given way to short-duration projects as clients seek greater control on their budgets. As clients splinter their marketing needs into smaller fragments (ecommerce, data, consulting, analytics), besides conventional services, business is getting pushed more into short-term projects.

This shift can unsettle life at agencies. Without the stability and certainty of a retainer agreement, it gets difficult for an agency to predict revenue and workloads, DDB’s Krasser told Campaign. “Which in turn means that balancing resources and cash flow becomes a tough task,” he added. “A heavy shift towards a project-based model means that agencies will be quite conservative in terms of investing in talent and rebuild their organisations with ‘leaner structures’ to maintain the higher profitability offered by conventional retainer contracts.

Shufen Goh, co-founder and principal R3, thinks the shift to project work may have unwanted repercussions for the industry. “R3 rarely sees project-based contracts driving business impact for agencies and clients on a sustainable basis,” she contends. “More project work can tactically help agencies in the short term to plug gaps in revenue, but it poses high risk of burning out talent, as project-based work tends to be loaded on to existing talent to max out bottom line.”

Read the full article at Campaign