AI Is Rewriting the Economics of Marketing Agencies — and the Fixed Retainer May Be Its First Casualty

In recent years, the marketing agency industry in Singapore has witnessed a shift in its business model due to advancements in artificial intelligence (AI). Traditionally, agencies charged clients fixed monthly retainers, regardless of the campaign's performance. However, AI has transformed both the cost structure and output capabilities of small agency teams.

AI technology has significantly reduced the administrative burden on agencies, automating tasks such as invoicing, quoting, reporting, documentation, scheduling, and follow-ups. This not only lowered overhead expenses but also freed up agency resources to focus on more critical aspects of campaign management. Moreover, AI has revolutionized the production process, including video editing, design, and ad creatives.

By handling the foundational tasks of editing, generating captions, and creating ad-ready variations, AI has increased a small team's production capacity while simultaneously decreasing the cost per campaign.

As a result of these cost reductions and increased production capabilities, agencies can now offer services with more competitive pricing to their clients. Singapore-based agency touchmkt has embraced this new model by implementing a revenue-sharing approach. Rather than charging clients a large retainer, touchmkt now imposes a minimal base fee and earns a share of the revenue generated by its campaigns. The agency accomplishes this by utilizing conversion tools that track sales back to the ads that produced them.

Touchmkt's founder, Charlie Tan, highlighted the importance of aligning the agency's goals with those of their clients. With the advent of AI, marketing agencies can now demonstrate their value through tangible results, leading to a more mutually beneficial relationship. The model does require discipline, including rigorous attribution and the absorption of risks associated with underperforming campaigns.

However, for small businesses that have traditionally been wary of paying retainers for activity instead of results, this new outcome-based pricing model is becoming increasingly attractive.

This shift in the marketing agency business model is not only changing how marketing is produced but also how it is paid for. Touchmkt, located in Singapore, exemplifies this transformation by combining on-site videography and photography with AI-assisted content production and performance advertising. The agency caters to businesses in various sectors, including F&B, education, beauty and skincare, renovation and home services, and professional services. For more information, clients can visit touchmkt.com or contact them at biz@touchmkt.com.