• by Jack Loechner , Staff Writer @mp_research, August 12, 2010

According to a new survey from the ANA, fees continue to be the dominant method of payment for advertising agencies, despite the discussions surrounding value-based compensation. 75% of all compensation plans use the fee-based model, while the value-based method accounts for less than 1%. 

Respondents to the survey also report that the use of traditional commissions has steeply dropped, being replaced by fee and sales commissions: 

• Traditional commissions accounted for only 3% of all compensations plans, as opposed to 16% in 2006/07. 
• Sales commissions, where the agency is compensated a percentage of the sales for the brand(s) it is managing, are gaining momentum, used with 15% of all compensation plans. 
• When considering only packaged goods marketers, sales commissions are used with 41% of agency compensation models.

Bob Liodice, President and CEO of the ANA "... as the marketing profession seeks greater accountability, our industry must... evaluate what compensation method best... helps to determine return on investment."

The 15th Triennial Trends in Agency Compensation study is the foundation for the book of the same name, now available as a free download to ANA members and for purchase by nonmembers at www.ana.net/publications. 

The 2006/07 and 2010 surveys show that 47 and 46% of the respondents are using performance incentives, respectively, in 2010 usage is up by larger marketers.  Of those who spend more than $30 million annually, 70% employ performance incentives with at least one of their agencies.  This practice drops considerably with smaller advertisers, as only 8% of those under $30 million in annual advertising spend are using performance incentives:

The two most popular criteria for these incentives are agency performance reviews (78%) and sales goals (72%)  

• Market share goals are the third most popular criteria used to evaluate performance for incentives, rising from 24% in 2006/07 to 34% in the 2010 survey
• Despite the recent tough economic climate, 14% is the average profit of respondents who receive cost and profit information from their agencies, the same as was shown in the 2006/07 survey 
• This profitability aligns with what respondents considered to be acceptable profit margins (12%) and what they felt the agencies, on average, would like to be earning (16%) 

For additional information from the Association of National Advertisers, please visit here.