Q: We would like to be able to sell your services to our clients but need to obviously make a profit and therefore are asking if you offer a trade discount for your services and can we operate under our branding.
Promotions Company Owner
A: Selling on video services is when a lead agency, such as an ad agency, design agency, PR or promotions agency, has a client who would like a video or DVD.
The lead agency is tasked with locating a suitable third party video production company (like Studio Rossiter) to produce the video or DVD for them. This is something we’ve done on a number of occasions.
While this relationship works well, it’s not always as simple as a straight mark-up.
Lead agencies frequently outsource whether for printing, animation, photography and a whole raft of services.
As a broad rule of thumb (but by no means always true) they provide copy writing and design from in-house, and outsource most else.
When outsourcing video there are broadly three types of arrangement:
The Client Pays a Standard Mark-up
Many lead agencies have a standard mark-up agreement with their clients, operating transparently to add, say, 17.5% mark-up on all bought-in services.
The client happily pays this as they know that all third party suppliers are vetted and approved as suitable, and have the precise skills that are needed.
The mark-up appears on the billing as a standard rate.
The Client Pays a Variable Mark-up
Some lead agencies don’t discuss the mark-up % with their clients. They simply give them a price for the whole outsourcing cost.
This price may include up to 50% mark-up.
If it’s a high mark-up it probably won’t be shown on the billing as such. It’s less than transparent, but if the client is happy with the end result and the price, then who’s complaining?
The Client pays for a mix of services
In this case the lead agency provide some of the video production services.
For example they may write the script, or get involved in the set design, or do the casting of the actors.
When a lead agency becomes involved in part of the production they normally bill for this part of the video production services at their own agency rate.
So they’ll bill for work they actually do, or meetings they attend and, in addition, add a mark-up to the 3rd party video producer’s bill.
There are many variables when outsourcing video production for a client, probably as many variables as their are agencies who outsource. But hopefully the above should be a guide to the different types of business arrangements that exist.
© Studio Rossiter