• by Karl Greenberg , May 9, 2012

Ask General Motors about global agency relationships. The automaker recently created a global working group comprising two holding companies to herd the cats of redundancy, fees, and general agency proliferation around the world. It ain't easy. Dealing with global agencies, and local subsidiaries, not to mention the marketer's own regional offices, poses challenges at every bend. There are also some stark differences inside versus outside the U.S. when it comes to agency compensation.

These latter similarities and differences are delineated in the Association of National Advertisers’ (ANA) first-ever Global Agency Compensation Survey, which offers something of a sub-orbital view of how marketers structure and manage compensation practices with their advertising agency partners worldwide and locally. Although the study polled marketers in nearly 40 countries on every continent, the results were similar to how things work in the U.S. 

The study, which polled 71 marketers from global marketing organizations including Brown-Forman, Dell, Ford, IBM, Intel, Johnson & Johnson and Merck, in February and March this year, found that for 57% of respondents, fees are the dominant method of agency compensation. A big divergence from the U.S., per the study, is that while none of the respondents said they use only traditional commissions to compensate their global agencies, 37% of those outside the U.S. said they combine fees with commissions. In the U.S., only 6% of global marketers use a combination of fees and commissions. 

According to David Beals, president and CEO of R3:JLB, who worked with the ANA on the study, two factors favor fees plus commissions outside the U.S. First, in markets like Japan and Brazil, commissions are still the dominant compensation practice. Second, in smaller markets, where campaign commitments are less predictable, fees don't make sense because spend is not steady.

The study also says global marketers are considerably more likely to base incentives on such metrics as media delivery, brand perception, digital delivery and copy testing, and far less likely than in the U.S. to employ sales metrics as a success criterion.

And only 4% of marketers use new approaches like value-based remuneration, while half now employ performance-based incentives -- just slightly more than in the U.S.

The respondents also articulated the problems they have managing global agency compensation. They include getting everyone aligned to goals, strategies and approaches, both within the client’s organization and between the client and agency global operations; serving the marketing needs both of the global organization and its local operations; and untangling country-by-country differences in compensation rates, languages, cultures, laws and practices, not to mention a territorial mindset within local client organizations.