Agency remuneration

Merry Baskin
Baskin Shark

Merry Baskin examines fee structures that should keep the procurement department and agencies happy, and the common pitfalls to be avoided

According to the Incorporated Society of British Advertisers, over half of agency contracts put some of their fee at risk by including a variety of performance-related incentives.

Once upon a time, brands grew and advertising budgets grew alongside them. Neither client nor agency bothered much which half of the advertising budget was working. Add a couple of global recessions, growth stalling, spends shrinking, media consumption splintering and consumers Sky Plus-ing over the ad break and suddenly 'which half of the wasted ad budget can we cut?' is the cry of the procurement manager.

Many creative agencies negotiate labour-based fees with each client. An hourly rate for servicing the account means that there is little incentive to streamline creative development. If nailed to the wall, agencies lack the margins to put their best strategic people or high calibre creatives on the account to deliver the brand building work that makes the client money.