Fees remain the dominant form of compensation for advertising agencies, according to the Trends in Agency Compensation Survey released by the ANA and R3:JLB. The survey reveals new insights about how marketers structure and manage compensation practices with their advertising agency partners.
While newer methods have gained a foothold, 81 percent of marketers who participated in the survey continue to employ some type of fee compensation throughout all agency types and services. Labor-based fees, rising from 49 percent in 2010 to 65 percent in 2013, are leading the compensation trend.
While the main types of compensation have not changed, the reasons for marketers to adjust their compensation approaches have. This year, almost 40 percent of marketers said the main reason for changing their compensation method is to improve agency performance. Cost-cutting is no longer the driver behind change, with a 13 percent decline from 2010 to 2013.
“This year’s survey highlighted a major shift in structuring and negotiating agency compensation,” said David Beals, President and CEO of R3:JLB. “Now more than ever, marketers are focusing on agency performance rather than cost-cutting, a practice which was popular during the economic downturn.”
Other key findings from the 2013 Trends in Agency Compensation Survey include:
The use of performance incentives increased from 46 percent in 2010 to 61 percent in 2013, with larger advertisers implementing performance incentives significantly more
Seventy-five percent of advertisers measure performance incentives by agency performance reviews; 71 percent by brand awareness; and 52 percent by sales goals
Eighty-two percent of companies in 2013 use a procurement team to review agency compensation compared to only 56 percent in 2010
“The Trends in Agency Compensation Survey provides valuable information for marketers to critically analyze the current practices within their companies,” said Bob Liodice, President and CEO of the ANA. “With the industry constantly adapting to refreshed working environments, marketers can weigh and implement the survey findings to make informed and successful compensation decisions for their companies.”
The 2013 Trends in Agency Compensation Survey was fielded online during the first quarter. In total, 98 client-side marketers participated from organizations.
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