Page 142 - Duct Tape Marketing

126 Part II: Sharpening Your Marketing Focus

ߜ Ownership of materials: Just because you pay for advertising materials
produced for your company by your agency doesn’t mean that you nec-
essarily own them. Be sure that your contract covers this issue. Ideally,
it says that any material presented to your company by the agency
becomes the property of your company upon payment for the services
rendered. Be aware, though, that even if you own the agency’s work on
your behalf, you don’t necessarily own unlimited rights to the artistic
materials included in that work. Photos, illustrations, original artwork,
and even voice and acting talent are usually purchased with limited
usage rights. When the agency is buying outside art or talent on your
behalf, you need to ask whether the purchase covers limited usage
rights, unlimited usage rights, or outright ownership.

ߜ The term of the relationship: The contract might remain in existence
until it is “canceled by either party,” or it might cover a finite period.

ߜ How the contract can be terminated: This is the “prenuptial” part of
the contract. It tells how the agency will be paid during the termination
period, how contracts that can’t be canceled will be handled, and how
client materials will be returned from the agency.

Most agencies prepare and submit the contract to you so that all you need to
do is review it carefully (preferably with your attorney), sign it, and keep it on
file for future reference. As you sift through all the legalese, keep repeating
the mantra “An ounce of prevention. . . .”

Understanding how agency
fees are calculated

Most agencies are compensated by a combination of fees for time expended
and commissions or markups on purchases made on your behalf. While a
growing number of agencies and freelancers are moving toward a straight fee-
based method of compensation, and while others are willing to negotiate the
amount by which they mark up expenses, the following explanations describe
what are still the most common calculations on agency invoices.

Commissions: When an agency buys a $1,000 newspaper ad for a client, if the
newspaper allows the agency a 15 percent commission, then the agency bills
the client $1,000, pays the newspaper $850, and keeps the $150 commission
as part of its compensation.

Newspaper ad charge billed to client $1,000
Less 15% commission to recognized agency -$150
Agency payment to media $850