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“I don’t want to work with a company that’s not as committed as we are.”

The Long and Short of Digital Agency Contracts

My agency just lost an account. It was a decent size. They just picked up and decided they didn’t want to work with us anymore. They chalked it up to internal changes. And they can do that. We don’t have contracts when it comes to our marketing engagements.

Based on the way I feel when this happens, I want to create a long-term contract and enforce them. And we’ve gone back and forth on this in the past. I’m trying not to be emotional about this decision. I want to look at both sides. The pros and cons.

Granted, our initial agreements have standard language-based on no-poaching, etc, to protect us, which you can see here. But the concern here is the term or length of the engagement.

I don’t want to work with a company that’s not as committed as we are. Sure, this is going to happen from time to time, but if we can lessen the demoralizing blow to the team and get a real shot at being a change agent with their company, we can get some results that move the needle.

The Argument for Short Term to No Contracts

#1 – Easier to sell. The client is more comfortable when they’re not locked into a long term contract. This is alluring and it feels right because of my second point.

#2 – I hate contracts. I don’t want to be locked into a contract whether it’s home security or a phone plan, so I get it.

#3 – It’s competitive. When the competition is doing it one way, I’ve always tried to do it another way.

#3 – The agency is continually delivering their best work. There are no laurels to rest on here. Not that we would in a longer-term contract, but I think there’s added pressure here and that can help a team perform. When you know that it’s month to month, that added pressure does something.

#4 – If the client is unhappy, they can leave instead of spreading their dread within my agency. In fact, this is why we got away from contracts in the first place. If clients were unhappy, we were unwilling to see the contract through. We didn’t want them “tracking shit in our house” as I liked to say.

But don’t just take my word for it. Here’s some input from John Paul Strong from Strong Automotive on why he prefers 30-day contracts.

“Having a 30-day contract is extremely refreshing for your client or prospective client. It shows that you have no problem putting your money where your mouth is and if you don’t then there is no long-term guarantee. I find that deals are easier to close and it creates a much warmer launch of a relationship when you aren’t bound to something long term. It also has a distinct advantage for the people in my company to perform.”

“They know we are only employed month to month so it ties their efforts to bring their best for our clients all the time. Some people in the industry say we are crazy to not have a longer-term contract but in the past what I have found is when a client is ready to split, its usually time to cut ties and its best for all involved to do that fast.”

And here’s what Sara Mannix from Mannix Marketing when she weighed in:

“We do a monthly marketing contract, month to month cancel anytime with 60 days’ notice so we can plan for resources. Our feeling is that we need to prove value to the client every month. Contracts are critical to protect the customer too, to make sure they know exactly what they are getting and paying for on a monthly or annual basis. Last month, I was talking to a client about a marketing solution to one of her issues, we discussed pricing and that it was a full year project.”

“She was very excited and said, yes, I want that, can you start right away. When I sent the contract, she did not understand that the fee was a monthly fee even though I told her so in the meeting. The contract saved us both disappointment and allowed us to reconnect and discuss her options.”

On the flip side, there is a strong argument for long term agreements.

The Flip Side – Longer-Term Contracts

As an agency, there’s a good argument on why you should have a longer-term contract.

# 1- First and foremost, it protects the agency. They need a commitment from the client that they won’t up and leave like in my situation and create a gaping hole in our capacity.

# 2 – When you want to sell, this is a huge factor in what the purchasing company looks at. They want to know how many contracts you have and to what length. This is very attractive to buyers. And it should be. This is near-guaranteed cash flow.

#3 – Shows true commitment and buy-in from the client. They’re in this for the long haul. They signed a contract stating that this is what they want and they’re willing to pay for it for 12 months or more.

Here’s what Gabe Shaoolian from DesignRush had to say about contracts.

“It depends on the purpose of the project and its goals. If it is a short term project, a one-time project, like a microsite build or set up for a campaign, then a short term contract makes sense.”

“However, if it’s to execute a marketing campaign, then longer-term contracts make sense. You need to give the team time to become familiar and improve on the results. Just like you would if you hired an internal person – you wouldn’t expect an employee to hit out of the park in month two, right? You would give them time to become familiarized and improve upon their results. It’s only fair to give the agency the same chance.”

The Reality

Truth be told, not having contracts in marketing comes off as confident to the client. But in reality, it’s arrogant. How amazing is what you do as an agency going to seduce the company into continuing to work with you no matter what? It’s way too one-sided. If anything happens within their company, they’re gone. Why wouldn’t they be? You’ve communicated to them that you don’t need them—that’s why you don’t have contracts. And or that you’re so good that you can replace them on a whim.

The big takeaway for us here is that we’re going to start doing shorter-term contracts for our marketing. A minimum of 3 to 6 months depending on what they’re asking.

On the other hand, this is going to be harder to sell. We would be naive to think otherwise. Competition is at an all-time high, but in the long-term, for my agency, switching to “long-term” agreements just makes sense.

What do you think? Let me know in the comments below.