What is the rationale behind branding agency costs? We want to get a brand positioning, identity and digital strategy project done and we have costs for exact same deliverables that range from 3 lakh to 3 crores and everything in between. How much can we negotiate?

Answered by Meeta Malhotra

Reena, typically agency costs are calculated on a cost-per-day basis for all the different skill-sets needed for a project.  The truth, however, is that most agencies charge what they believe the client will pay in that particular situation. Successful branding agencies get away with charging a very large sum, because they say that the work they do is enduring (unlike an ad campaign) and therefore costs are amortized over many years.

How much you can negotiate depends on how badly the agency wants the project. That, again, is a function of their current order book and how desirable your brand is. My personal view is that if an agency gives you more than 15-20% off during a negotiation, then they were misquoting in the first place and that makes them untrustworthy.

There are other ways you can look at the cost. In addition to the project fee, there are usually small variable costs for artworks, prints, changes, etc. You can usually push back more on these. You could  look at increasing scope, instead of just decreasing cost. Also discuss building in a performance-linked bonus fee.  Negotiate hard by all means, but do remember that the agency needs to feel motivated in order to pull in their A team and do their best for you. If that means you need to leave a little money on the table for them, then I would recommend doing it after a frank chat to explain your point of view.