Agencies don’t know how much they are making on your business.
Because of the backward retainer system endemic to the industry, it is hard to say what the real margin is on any one business. The agency may be making a healthy margin on the day-to-day delivery team, but there are a lot of costs that are built into the general overhead of the agency. These costs include people and money spent up front in the new business process, the time of agency executive management in supporting the business relationship, and the ad hoc responses to sudden market developments or changes in direction. These costs tend to get mixed into the general administrative costs of the agency, and assigned to agency overhead. That makes overhead a murky number full of costs that may or may not be fairly allocated across clients. A client with a high margin who likes to manage by crisis may actually be less profitable than a low margin client with a more steady operational approach. So while generally agencies know how they are doing as a whole, they have only a fuzzy idea of how they are doing on any one particular client. As a result, marketers assume agencies are making too much, and agencies assume they are making too little.
The Ryan Report 