Advertising Agency Compensation in a ROI Driven WorldWe hope that you will find the following article to be helpful. If, after reading, you would like to explore our thought leadership on a deeper level, please contact Kerry Kielb at email@example.com. Advertising Agency Compensation in a ROI Driven World
- Agree on the key goals and objectives of the relationship up front
- What are the marketer’s business goals? What are the agency expectations, e.g. category growth, market share, attitudinal shifts, compliance?
- If necessary, set up a separate operating unit to manage this relationship (we call it “Inter-Firm”). This unit should have its own management team with representatives from both sides to track mechanisms and manage an unbiased review process.
- Develop a very tight Scope of Work.
- Match resources with the amount of work to be done i.e. strategic planning, research, creative development and execution of anticipated campaigns, media planning and buying; the list goes on. Determine in advance who will be responsible for what activity and what the work flow process will be.
- In a new relationship the exact degree of services to be utilized may be impossible to nail in the first year. Allow enough room for offensive or defensive marketing tactics that may change as a result of market swings.
- Create a compensation model that is easy to understand and administer
- Commissions on marketing expenditures, fixed fees, cost-plus, labor-based and incentive-based arrangements are only a few of the methodologies that work effectively when both client/agency interests are aligned
- What are the agency’s goals and objectives—how will/can they achieve a fair profit? What might be an upside potential for outstanding work? Do the parties agree in sharing rewards and risks?
- Compensation details
- Depending on what agency compensation model you select, make sure there is agreement on all facts such as definitions of costs, labor hours used, multipliers, incentive criteria, terms and so on.
- An experienced independent third party can help identify gaps in expectations and definitions.
- Utilizes senior staff within the company and brings agency compensation experts into the negotiations
- Prepares a proactive “rules of engagement” playbook
- Approaches discussions from both sides of the agreement
- Educates each other about their own internal procedures and standards
- Learns from other industries that have successfully navigated agency contract negotiations
About The Bedford Group
The Bedford Group is an Atlanta based Marketing Management Consulting firm that has been in operation since 1986. It has built its reputation on marketing organization support, agency search and relationship management and strategic marketing consulting. Unlike traditional advertising consultants, The Bedford Group looks beyond traditional marketing disciplines to solve complex, enterprise-wide issues for efficient resource management and improving marketing ROI.