A new report from media consultant ID Comms finds that media shops continue to be regarded with “suspicion” by advertisers, a number of which believe that non-transparent incomes, such as the profit from reselling media to clients, makes it harder to use fees and other contract terms to properly incentivize agencies.
The report is based on a survey done in May. The 102 respondents included client-side professionals with collective annual ad spending exceeding $20 billion, as well as agency pros from all the major holding companies.
While 80% of respondents agreed that “fair” business terms lead to more transparency and better alignment between agency and client business outcomes, the two sides largely disagreed on the best ways to make that happen.
For instance, most client-side respondents believe contract terms are the most influential factors in achieving transparency and alignment.
Agencies, however, indicated that scope of work was a more important factor to reaching transparency and alignment goals.
The two sides also differed on how “fair” current terms are with agencies -- saying that both fees and overall payment terms were less fair than the client-side respondents tended to indicate.
As for pay models, the one receiving the most support from respondents was a Fee-only or fee-plus-bonus setup, which 30% said was the “fairest.”
The next-highest scoring model was “value/performance,” which 21% of respondents replied was the most fair, followed by a hybrid commission/fee structure (18%). A return to commission-only payment was favoured by just 3% of respondents.
“A clear scope of work, fairness in fees and payment terms and a great contract that protects both sides are the must-have tools for aligning agencies with advertisers and creating a productive, trusting working relationship,” stated Tom Denford, chief strategy officer at ID Comms.
“However, it’s clear from these results that there remains a huge variety of opinions on what should drive these beneficial behaviors and the other factors that might be in play,” he added.