Diageo's global category director advertising favours a commission-based payment model
Diageo's global category director advertising favours a commission-based payment model

'Marketing procurement needs new payment model'

Will Green is news editor of Supply Management
13 June 2018

The biggest challenge facing marketing procurement is the remuneration framework.

The common model, under which agencies are paid for the time spent on an account, encourages firms to put more people on projects and spend more time on them, delegates at ProcureCon Marketing in London were told.

Simon Tilden, global category director advertising at Diageo, said: “The biggest challenge we face is the remuneration policy with agencies. What we need as an industry is to create a new model.

“I like the commission model. It’s very simple. The agency will earn good revenue out of content that is used and used.”

Tilden said under a model where agencies are paid by the hour, “if they spin it out for as long as possible, the more money they make”.

He called for an industry group to be formed including academics where someone could come up with an algorithm for a “results-oriented remuneration policy”. “People can create content and we can measure it and they will be rewarded for it,” he said.

During a panel discussion, delegates were told a survey showed 55% of clients felt the agency model was not working, three out of four were reviewing their structure and three quarters (74%) wanted agencies to be “true business partners”.

Tilden said: “When you have an agency that’s really embedded, they can get under the skin of where the brand needs to be.”

He said Diageo organised regular independent surveys at the agencies they use and with brand teams to assess relationships. “My team sits with brand teams, so a really close working relationship,” he said.

Tigran Avakian, director global procurement EMEA at Mattel, said an obsession with spreadsheets and cost per hour contributed to the breakdown of a relationship with an agency. He described how Mattel ended up being billed for the cost of coffee on a shoot.

“We felt they were nickel and diming us,” he said. “A couple of years later the relationship came to an end.”

During a separate panel discussion Paul Hammersley, founder and CEO of Harbour Collective, said: “If you are paid by the hour it encourages you to have more people on the account, spending more time on it. It’s the whole issue of cost plus, rather than value, that we need to deal with.”

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