Shifts in Agency Compensation Practices

By Kerry Breen, senior manager, marketing knowledge center at ANA

Last month, the ANA released the 17th edition of its “Trends in Agency Compensation” research. The study, which has been conducted every three years for nearly 50 years, tracks changes in compensation practices. According to key research contributor Dave Beals, president and CEO of JLB + Partners, “Some marketers are choosing to simplify compensation by using a commission method instead of negotiating the different labor and tech cost elements.”

The ANA uncovered two recent shifts in the methods marketers use to compensate their agencies:

•     Use of labor-based fees has decreased for the first time since 2006.
•     Performance incentives have declined for the first time in the history of the survey.

In the report, Julie Kershmiry, global media director at Intel, explained why her team is moving toward commission-based compensation. “The rationale for consideration of a commission model is not another way to save money; it is a way to respond to the agility needs of our business. In the past, too much of our time was spent negotiating and renegotiating the contract, re-looking at it and reselling it up through management. By the time we did all that, months had passed and it was good for no one. We’re trying to move to a commission model that still reflects the appropriate volume of pay, but gives us a little more agility in terms of how we handle the fee.”

The new research also found that, as marketers seek to simplify their agency compensation practices, performance incentives have declined for the first time ever in the history of the survey. An increasing number of marketers feel that incentives are not working to improve agency performance.