Almost three quarters of large companies have said changing the way they pay ad agencies would improve relationships, according to a study.
A survey of global and regional senior marketing procurement professionals from 42 companies, responsible for combined budgets in excess of $84bn, found 71% of companies in favour of such a change.
The Global Agency Remuneration 2018 report, carried out by the World Federation of Advertisers and consultancy The Observatory International, said 81% of respondents expected a “continued shift towards performance-based remuneration models with a focus on outcomes”.
“This will mean the continuing decline of payments based on how much work is carried out, as well as commission-based payment models,” said the study.
It quoted one respondent who had moved to “100% of payment based on incremental sales generated”.
The proportion of respondents using results-based payment models has risen to 28% from 20% in 2011, when the WFA carried out a similar survey.
One in seven (15%) said they currently combine performance with labour-based payment – up from 9% in 2011.
However, for eight in 10 respondents (80%), an average of less than 20% of total payment was linked to performance.
The report said agencies would welcome the increased recognition of the business contribution they make to their clients, but such a model would need to be fair and would depend on establishing clear, achievable and measurable KPIs.
Nine in 10 (87%) respondents felt they were getting genuine value for money from agencies – up from 67% in 2011. Yet 52% of respondents believe agency costing models are not fully transparent.
Receiving sufficient detail on marketing work was also a problem for respondents, with only 31% saying they get a highly detailed scope from their marketing counterparts.
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