Brands Want Performance, Not Head Count

It used to be enough to charge a hefty retainer, citing how many people you have working for a client, sitting behind desks and circled round for meetings on beanbags in breakout areas.

Now, however, research suggests that four in five clients see the move to performance-based renumeration as inevitable.

An additional 71% agree that moving toward performance-based renumeration would be a good thing for their business. So those who haven't broached the subject yet are pretty convinced it makes good sense.

These are the findings of the World Federation of Advertisers (WFA) working with The Observatory International, which shows that renumeration models are being reappraised globally.

The figures show that eight years ago, 20% of agency and client relationships were billed around the output the partnership created -- a figure that has now risen to 28%. Similarly, back in 2011, 9% of contracts were based around a hybrid of performance and how many people were working on an account. That figure has now nearly doubled to 15%.

OK -- so it's not too dramatic, but it does show a direction of travel. 

Perhaps the biggest takeaway from the global research is that four in five respondents expect their billing arrangements with agencies to shift over the next 12 months to include performance, output and value-added components. 

This reminds me of a discussion I once had with the marketing boss of a very well-known drinks brand who could not believe how many people there were working on his account when he went to meetings in London at his agency's swanky offices. Well, at least he couldn't quite fathom how many were said to be working on his account.

His solution was to scale things back and to insist that more meetings were held in his out-of-town office. That way, he always knew how many people were working on his account that day and could correlate their day rate against the bill that would soon arrive.

There must be many stories like this. People that have come into the business since the Mad Men era heyday when an advertiser would boast of how many people were on their account at a big agency. 

Things have changed, and they continue to change. The clients I talk with now want better value. They don't want to be flattered with a big head count -- they want results and a good idea they are getting good value for their ad dollars. 

So, the fact that four in five advertisers are expecting to move to a more performance-based means of billing over the next year is perfectly in tune with what many in adland have undoubtedly been noticing.

It's all about what you get for your budget now -- not how many people are providing it. 

3 comments about "Brands Want Performance, Not Head Count".
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  1. Ed Papazian from Media Dynamics Inc, January 31, 2019 at 12:59 p.m.

    I wonder what percentage of these new contracts which, in effect, make the agency the client's "partner" will grant the ageny a share of the client's profits in the event of a successful ad or marketing campaign?

  2. dorothy higgins from Mediabrands WW, February 1, 2019 at 9:37 a.m.

    Guess what...the agency still has to figure out exactly how many whos at what levels of expertise in which disciplines are necessary to drive that performance and derive the cost plus margin accordingly. So, may I say as nice,y as possible, whatever. 

  3. Ed Papazian from Media Dynamics Inc, February 1, 2019 at 11 a.m.

    In my experience the client not only approves all of the key decisions or recommendations made by the agency in its behalf and, in many cases, simply  directs the agency to do what it wants done. So why not take the responsibility instead of pretending that the agency---which has no control over the quality of the product/service, its distribution, pricing, etc. ---must be paid on a "performance" basis---meaning, no doubt, sales, not just professionally executed creative and media planning/buying work.

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