The most common and complex frustration of a client in the area of marketing value management is finding a relevant remuneration structure for agencies that can work for both the client and the agency.
Ask yourself – does your agency remuneration model provide you with flexibility, transparency and relevance to your campaign requirements and changing budgets. If not, if could be time to look at your contract to maximise your ROI.
Common Frustrations
At Enth Degree, with over 20 years’ experience, we are market experts in agency remuneration for major marketers Nationally and Internationally. We have seen both the best and worst in agency remuneration practices and have great understanding of the elements to get it right.
Remuneration model issues:
- The agency fee is based on salary and timesheets, but the agency will invoke the Privacy Act, so actual employee salaries and timesheets are not transparent to the client and can’t be reviewed.
- Staff resource plan is based on media billings without clear job volumes or sense of what is required.
- On contract renewal, the agency presents a fee increase based on timesheets, yet they still don’t understand your business!
- The Agency fixed fee is based on “upper quartile” of the AFA salary survey, but servicing and performance does not reflect premium fee. Fixed fee does not cover studio or production supervision so you have no idea on how much you are really paying in the total annual fee.
This can result in:
- Premium fees being paid without transparency on individual resources or justification through quality performance fee measurement.
- No flexibility for budget changes. Further we have seen when a client’s campaign budget is slashed by 50%, they are confronted by an increase in agency fees without justification. 40%-50% of the fixed fee is against account management when the team you really value is the creative.
- You’ve appointed a new creative agency to manage the new brand campaign, but you’re still paying the incumbent agency their original fee.
- Your agency retainer can represent only the tip of the iceberg with no clear understanding of total production costs.
New Solutions….
There are many, many ways to structure a remuneration model so there’s no reason why they can’t be ‘tailor made’ to individual clients’ requirements.
Our Remuneration Reviews make consideration to:
- Payment based on “outputs” i.e. the work produced rather than “inputs” like salaries and timesheets that can reward inefficient time management.
- Ensuring transparency for both parties and auditable if required.
- Link to a meaningful performance management process to reward for efficiency, quality of output and service excellence, which is easy to execute for both parties.
- Further, a client needs to understand their impact of delivering quality briefing, efficient approvals and payment processes to help manage agency performance and costs.
Action Points….
- Review your agency remuneration model and consider if it provides you with flexibility, transparency and relevance to your campaign requirements.
- Check the agency has no ‘Privacy Act’ barriers to provide you with complete transparency.
- Consider the potential to restructure your agency remuneration to pay for ‘campaign outputs’ rather than agency ‘cost of business inputs.’
- Contact us to discover new solutions in agency remuneration.
