Agency fees will increase as inflation continues to affect the advertising sector, according to The Institute of Practitioners in Advertising (IPA) director general Paul Bainsfair, who has warned that agencies will inevitably have to raise their prices in light of prevailing inflation levels.
In a statement issued by the institute, which represents the voices of marketers and agencies, Bainsfair stated that despite agencies navigating the fallout from Brexit and the pandemic, they will now face a “myriad of increasing problems and costs” that they can no longer be expected to absorb.
The news comes as the price of running television ads increases and the cost of living crisis rages on.
“No agency would take the decision to raise their fees lightly. But with inflation levels at their highest level in 40 years – rising by 9% in the 12 months to April 2022 and potentially hitting 10% in the last three months of this year, such decisions are, unfortunately, inevitable.”
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According to Bainsfair, creative agencies are encountering a sector-wide skills shortage with increases in recruitment fees. The industry is also facing wage pressures with increased competition for talented people, a raise in salaries to offset the cost of living, raw material increases, as well as soaring energy and production bills.
“After years of responding to the procurement demands of clients there is little or no room to respond with cost reductions, therefore, fees will have to increase,” he said.
“This is something that clients – facing enormous pressures themselves and in the main having to ensure that selling prices are moving in response – may not welcome but will certainly understand.”
Bainsfair states that clients must keep the value that agencies offer at the forefront of their minds when they see prices increase. He claims that agencies are not just “creative machines” but are also effective “commercial powerhouses” with expert understanding of consumers, including when and where is best to engage with them.
The IPA director concluded: “It is not for the IPA to tell agencies what to charge or how to operate. But as the power behind our practitioners we are here to provide guidance, support and a collective voice.”
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