Warc, 21 August 2013
NEW YORK: Fees continue to be the most-used form of compensation for advertising agencies, with client-side marketers also increasingly focusing on agency performance, a new survey has shown.
The Trends in Agency Compensation Survey from the Association of National Advertisers and R3:JLB, the relationship consultancy, was conducted online during the first quarter across 98 marketers from organizations such as Ford, General Mills, Hershey's, Verizon and Visa.
It found that 81% of respondents employed some form of fee compensation throughout all agency types and services. Most often these were labour-based fees, which the ANA said were "leading the compensation trend", being used by 65% of marketers, up from 49% in 2010.
The use of performance incentives had also risen sharply, up from 46% in 2010 to 61% in 2013. Larger advertisers were significantly more likely to implement such incentives, noted the ANA.
The measurement of performance incentives varied, with agency performance reviews the most popular, undertaken by 75% of advertisers. Improvement in brand awareness was a close second, cited by 71%, while 52% looked at sales goals.
Agency performance was also a driver in marketers adjusting their compensation approaches. Where once cost-cutting was a major factor, in 2013 almost 40% cited the need to improve agency performance.
This was, said David Beals, President and CEO of R3:JLB, "a major shift in structuring and negotiating agency compensation".
The greater involvement of procurement departments in agency compensation decisions – they now play a role in 82% of companies compared to 56% in 2010 – indicated, said MediaPost, that process was replacing relationships.
Brand management teams remained important in compensation decisions, with 67% involved, up from 47% in 2010.
The client's ad department was also influential in this regard, cited by 58% of respondents this year compared to 56% in 2010.
Data sourced from ANA, MediaPost; additional content by Warc staff