NEWS31 January 2019

Majority of advertisers want to change payment models

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US – Seven out of 10 large companies believe changing remuneration models would lead to better relationships with their agencies according to the World Federation of Advertisers (WFA).

Its report Global Agency Remuneration 2018 found that 81% of respondents expected a continued shift toward performance-based remuneration models with a focus on outcomes. This will continue the ongoing decline of labour-based and commission-based models.

The number of respondents currently using output-based fees as the main corporate remuneration contract has risen to 28%, up from 20% in 2011, when the WFA conducted similar research. A further 15% combine performance with a labour-based payment (up from 9% in 2011 ). 

Over the next 12 months, 81% of respondents plan to increase the prevalence of output, performance and value-based remuneration models.

However, across all types of agencies, on average less than 20% of the total remuneration is linked to performance for 80% of the respondents. And for more than half of the respondents, less than 10% of remuneration is related to this.

Laura Forcetti, WFA’s global marketing sourcing manager, said: “Agencies are vital partners for many advertisers and the way they are paid is a critical step in establishing a productive relationship that delivers real return on investment while also offering agencies the chance to be rewarded for the success they help generate. The move to performance-based remuneration recognises that where agencies and advertisers are aligned, the outputs are more likely to be better for both.”

Research conducted by the WFA with The Observatory International looked at how advertisers are evolving the way they pay agencies based on responses from global/regional senior marketing procurement experts from 42 different companies with a total communication spend in excess of $84bn.