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NEWS11 May 2012

Pay-for-performance slow to gain ground in MR

North America

US— Pay-for-performance might have taken hold in the advertising industry, if a survey by the Association of National Advertisers ( ANA) is to be believed. But the concept doesn’t seem to be gaining ground in research just yet.

Twenty months after Coca-Cola’s Stan Sthanunathan promised in a conference speech that agencies would have to get used to the idea of “value-based compensation”, the evidence of it being used in practice is slim.

According to the ANA study, 49% of global advertisers, and 46% in the US, report using performance-based incentives. Yet the figures don’t look half so impressive against a survey by the American Association of Advertising Agencies, which found that performance incentives accounted for only 3% of the revenues of agency holding companies ( as reported by AdAge).

There’s no hard data on how this might compare in the research industry, but anecdotal evidence suggest the figures would be significantly lower.

Awareness of the pay-for-performance concept is high, reports David Timberlake of The Marketing Information Company, which has set up a service to make sure that research agencies deliver on the contractual promises made to clients. Yet his firm focuses on measuring performance at the point of delivery – to verify that research quality and service targets are hit.

Much more elusive is the ability to link a research project directly to a successful business outcome and reward the agency accordingly. Research suppliers often point to the huge number of steps between research delivery and the execution of a strategy, meaning there might well be factors beyond their control that will determine whether the research lives up to its potential.

Others suggest that pay-for-performance is largely unnecessary: an agency is unlikely to be re-hired if the client-commissioner doesn’t feel that they have received sufficient value from a piece of work. This, they say, should be incentive enough, especially if the bulk of an agency’s work is on ad hoc projects.

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