New agency payment models urged

Warc, 10 July 2014

LONDON: Agency remuneration needs to move away from time-based billings and towards long-term output-based models a leading industry figure has argued.

Martin Riley, Pernod Ricard CMO and president of the World Federation of Advertisers (WFA), told the IPA's Performance Adaptathon in London that "endless discussions of remuneration and commoditising of work is a cost exercise which is not solving the problem of what the client/agency relationship really needs".

And he expressed concern, based on the experiences of WFA members, that the gap between the two sides on many issues was not closing. "I sense that clients are moving much faster ahead in the areas of flexibility, structures and competencies than our agencies, and that worries me," he said in remarks reported by Marketing Week.

Pernod Ricard remains wedded to an hour-based approach to billings, with around 75% of agency remuneration calculated this way, but is experimenting with new models. And Riley believed there was an opportunity here to develop the agency relationship in new directions.

"As our marketers invest more in innovation and are encouraged to be more experimental there's an opportunity for agencies to be rewarded based on their contribution to that innovation," he explained to The Drum.

Pernod Ricard's teams have been also been restructured into smaller groups to be able to more quickly respond to innovative ideas from agencies and Riley hoped that agencies could react the same way.

"We're also evolving the review process for our agencies so that it's much more geared around a long-term value relationship," he added.

If it helped the business Riley was even prepared to countenance working with talented individuals outside an agency relationship.

"We want talent who know our business and who have a great insight," he said. "We want some really original thinking to help us with our business problem and agencies need to segment their teams into the business model."

Data sourced from Marketing Week, The Drum; additional content by Warc staff