Cost plus agreement

sunandaC

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The cost-plus system is generally used when the media billings are relatively low and a great deal of agency service is required by the client. This happens most often with industrial products, new product introductions etc. that require disproportionate amount of agency help in preparing brochures, catalogues and other non- commissionable marketing activities.

Under a cost-plus system, the client agrees to pay the agency a fee based on the costs of its work plus some agreed-on profit margin (Often a percentage of total costs a percentage of total costs ).This system requires that the agency keep detailed records of the costs it incurs in working on the clients account . Direct costs (personnel time and out-of-pocket expenses) plus an allocation for overhead and a markup for profits determine the amount the agency bills.
 
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