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How does an advertising agency retainer work?

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Quick Answer

An advertising agency retainer is a payment method where the agency bills a client company a specific amount of money per month for all work performed on an account. Retainer agreements allow the agency to dedicate more talent resources to an account. They are typically active for 1 year.

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Full Answer

It is standard practice for many advertising agencies to work for companies on a retainer basis, particularly if the client is large. Retainers allow agency clients to know in advance how much of its marketing budget is spent on agency work. Each month the client pays the agency the same fee, which is based on the number of billable hours agreed upon in the retainer contract. For example, a company agrees to retain ad agency services for 200 billable hours per month. Typical services under the agreement may include conceptualizing ad campaigns, writing advertising copy and developing a commercial for a brand product. The agency divides the time its personnel spends on the account by the total hours allowed under the retainer. Actual hours spent working on an account vary each month; however, the client pays for exactly 200 hours.

Client companies benefit from the retainer model because the ad agency is able to create long-term project strategies. Clients have the option of renegotiating a retainer agreement at any time.

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