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Agency payment models prove slow to change
Date: 04/05/2010
Agency remuneration models in the US have been slow to move towards the value-based approach championed by companies such as Procter & Gamble. WFA's US member, the Association of National Advertisers, reached the conclusion after surveying 75 of the largest marketers in the country, with its results covering partnerships with 1,039 agencies.
Overall, 75% of client-agency relationships employed fee-based remuneration structures, a total which compared with the figure of 63% posted in the last such poll in 2006.
More traditional payment models centred around commissions - which were essentially dominant until the mid-1990s - recorded a decline from 16% to 13% in the same period.
The number of contracts which contained performance incentives also decreased slightly from 47% to 46% compared with the ANA's last report.
However, value-based agreements had been established in just 1% of cases, despite the heightened emphasis on return on investment that accompanied the onset of the financial crisis.
The obstacles that are possibly discouraging the broader uptake of this means of payment are said to include a potential lack of clarity and the complexity of reaching terms that are satisfactory to both sides.
Such a trend particularly applies during the downturn, when it is possible for brands to increase their market share even though their actual sales have contracted.
The greater involvement of procurement departments in pitches and renegotiating agreements may also have exerted an impact.
Source: AdAge; additional content by Warc
WFA frequently runs surveys with local association members around the world to determine trends related to agency compensation. In addition, the move some global marketers are making towards value-based compensation models are a frequent discussion topic in working group meetings. For more information please contact Steve Lightfoot.
