Clients overhaul agency payments

The days when agencies could simply bash out a marketing campaign and then expect the client to cough up the cash are over, according to a new report, which shows performance-related pay will soon be widespread.
The World Federation of Advertisers study quizzed 43 member companies, operating in 12 different sectors and representing more than $100bn in annual ad spend.
It identifies major shifts in the way that clients reward agencies since the organisation last asked these questions in 2011.
Carried out in conjunction with global media management consultancy ID Comms, the survey shows that advertisers are increasingly looking to align agency interests with their business KPIs by giving them the chance to boost their income, if they can deliver additional value.
Some 11% of respondents already feature performance-based elements in their contracts (up from 7% in 2011), while a further 37% say they plan to implement performance incentives, 36% say they want to explore value-based compensation and 66% said they wanted to link agency income more closely to their own performance.
The most popular business performance metrics for creative agencies are sales volume and market/brand share, whereas for media agencies it is buying targets and composite performance scores. Digital agencies tend to earn their reward on the basis of sales volume.
Ad performance metrics being used for creative agencies included ad awareness and brand image shifts as well as predisposition to buy. Ad scores and ad awareness are commonly used for media agencies.
Soft metrics were more consistent across agency types with relationship management and agency service delivery being common, although media agency contracts were more likely to include elements related to administration, functional competence and thought leadership.
World Federation of Advertisers managing director Stephan Loerke said: “Establishing common interests in true business success is essential for advertisers and agencies that want to build long-term relationships.
“This research reveals how the world’s biggest advertisers are working hard to build new relationships that move away from commission and give their agency partners a reward for the success they help generate.”