Should you take the plunge?

John Wolfe

The always-sensitive issue of agency compensation has fallen under the same call for radical change that is being heard throughout the rapidly evolving advertising, marketing, and media industries. Cost-plus and labor-based compensation systems – currently predominant in client/agency relationships – have been criticized as impractical and out of step with the current marketplace, while the traditional 15 percent commission is as rare as a rotary phone. As a result, adventurous advertisers seeking more value for their marketing budgets and creative ad agencies willing to take risks in order to be treated as true marketing partners are experimenting with new compensation models. One of the most popular versions to emerge is called value-based compensation, or results-based compensation. Advocates and critics alike agree the system turns long-established models upside down even though, more often than not, it retains remnants of traditional models.