Tips for Improving Agency Compensation Practices and Transparency
The ANA’s latest Trends in Agency Compensation report states that the 2016 Media Transparency Initiative, which revealed pervasive non-transparent business practices in the U.S. media ad-buying ecosystem, had an impact on compensation reviews and negotiations. Marketers who were aware of the transparency issue discussed it with senior management and/or changed their practices regarding rebates and bonuses. One ANA member interviewed for the research indicated that the report was extremely helpful in negotiating a contract for a new agency relationship. Another shared that the report created a dialogue with the agency CEO, where choices were discussed and contract language was revised.
More than half of survey respondents said that it was somewhat or very likely that they would change their current compensation method for full-service, interactive/internet/digital, or multicultural agencies.
In a climate where marketers are looking to maximize the work they get from their agencies for the money they pay them, and agencies are trying to remain profitable with rebates, a mutually beneficial compensation method won’t come easily.
"We outlined specific actions marketers should consider to diminish or eliminate non-transparent and non-disclosed agency activities and to ensure that their media management processes are optimized," said Bob Liodice, CEO of the ANA.
Here are five things you can do right now to improve agency compensation practices at your company:
- Align compensation to business goals. Marketers should revisit their methods of compensation across agency types to ensure that their business goals are being supported, and not complicated. There is no one-size-fits-all approach to agency compensation. Traditional commissions might be work for one media function, while labor-based retainer fees work better for another.
- Establish agency management principles: Increase accountability and create disciplined processes, such as greater rigor in contract development and governance stewarded by a "chief media officer," who would oversee media strategy and optimize media mixes. This step-by-step toolkit can help you improve your agency management approach.
- Update your contract language: Contractual provisions that allow agencies to act as both agent and principal are common. Contracts should ensure strict accountability, compliance with effective management principles, rigorous process governance, and significant senior management oversight. Get started with the Master Media Planning & Buying Services Agreement template.
- Establish primacy over the client-agency relationship:Have a thorough understanding of the existing client/agency relationship and know when the agency is acting as an agent on your behalf or as a principal representing itself. Use the Agency Alignment Strategy Workbook to ensure you and your agency on the same page.
- Take ownership of marketing technology: When it comes to data and technology, advertisers should take ownership and exert control over the decision-making, rather than leaving it to their agency partners. According to the ANA’s research on marketing disruptions, brands that invested in marketing technology in 2016 yielded an average of 10 percent new revenue from their campaigns.
To read key findings from the research and learn more about agency compensation practices across the industry, visit the Agency Compensation Solutions Set.
Source
"Tips for Improving Agency Compensation Practices and Transparency." ANA, 2017.