How accountable agency remuneration can improve client agency relationships
November 8, 2011
The secret to developing a fair and sustainable agency remuneration model is having a process that is based on what you want the agency to deliver. In this case the agency can be any agency from media to pr to traditional creative agency and digital.
The foundation of the remuneration model is being able to define and quantify the scope of work. If you can quantify the scope of work then the choice of remuneration models can then be selected based on the best model. These models include:
- Spend based models – including media commissions etc
- Cost based models – based on the cost of resources
- Output based value models – based on the price or value of the output
- Outcome based value models – based on the value created by the contribution of the output
There are a number of ways to measure the success of remuneration models but one that I am particularly proud of is the success of the client agency relationships that are founded on our accountable and transparent agency remuneration models.
But it is not just our marketers who find the process successful, so do the agencies.
And at the very business-heart-of-the-agency, the CFO appreciates the process too.
I have found the issue with determining the right model and the right level of agency remuneration requires a discipline from both marketers and agencies in determining the right metrics on which to define the relationship and the outputs. Often the agency is focused on resource levels and cost recovery while the marketer is more focused on budget management.
If there is one area we have been particularly successful in, it is helping both the marketer and the agencies become aligned to a common metric which is the scope of work. What the agency produces is at the core of the relationship. Once this is determined, then the way you value this can then be discussed.
What are your issues with determining agency remuneration? And what solutions have worked for you?