Value-based remuneration has global appeal

22 October 2009

BRUSSELS: Marketers around the world are increasingly looking to value-based remuneration structures when it comes to paying their media agency partners, according to figures from the World Federation of Advertisers, the global trade body.

The WFA has conducted three separate surveys among its peer-to-peer groups of regional marketers in order to assess current trends across the industry.

Its findings are based on the responses of 21 companies in Asia-Pacific collected in July 2009, 28 firms in Europe in September 2008, and 13 Latin American organisations in the period from August to September this year.

Some 47% of advertisers in Asia Pacific said they pay their “offline” media agencies via a fixed rate commission system at present, compared with 39% in Latin America, and 23% in Europe.

A total of 50% of European respondents employ labour-based fees, measured against 39% of their counterparts in Latin America, and 16% in APAC.

By contrast, none of the WFA's panel in Europe used a sliding scale to determine commission, a figure that rose to 15% in Latin America, and 16% in Asia.

Just 8% of South American companies have opted for fixed or output-based fees, with 23% of clients in Europe, and 26% in Asia, also taking this route.

Value-based systems are most widely-utilised in Europe, where they have been rolled out by 32% of participants to date, falling to 5% in Asia, and none in Latin America.

With regard to compensating their digital agencies, 39% of Latin American marketers chose fixed or output-based models, with 31% favouring labour-based approaches, and 23% fixed rate commission.

In Europe, half of the organisations polled preferred fixed rate commission in this area, with 36% paying based on labour, and 23% on value generation.

Some 42% of Asian members of the WFA also looked to commission-based payments for digital agencies, with 26% selecting fixed/output-based platforms and commission on a sliding scale.

Looking forward, where advertisers planned to refine their media agency remuneration in the next year, 71% of the Latin American sample were hoping to make more use of value-based payments.

This shift reflects a similar trend observable in both APAC and Europe, where 83% and 40% of marketers respectively are also planning to implement such systems.

While not statistically relevant, the findings drawn from the samples across these regions can be regarded as indicative of the thoughts and actions of the large multinational marketers in the WFA's membership.

Data sourced from World Federation of Advertisers; additional content by Warc staff