• by Richard Whitman , Columnist, January 31, 2019

A new report from the World Federation of Advertisers and Observatory International finds that performance-based agency pay on the rise.

The report, based on a survey of advertisers that spend more than $84 billion annually on measured media, found that respondents using performance-based fees as the main corporate remuneration contract has risen to 28%, up from 20% in 2011, when the WFA conducted similar research.

An additional 15% combine performance with a labor-based payment (up from 9% in 2011).

Those numbers are expected to continue rising over the next year, per the report.

Among different types of agencies hired by the surveyed advertisers, the report found creative agencies have had a 20% drop in the use of hourly fee-based models and a 14% rise in the use of performance-based models since 2011.

Forty-four percent of those surveyed (compared to 16% in 2014) indicated they now offer a performance-based fee/bonus to their media agencies on top of hourly fees, while 7% have also started to use performance-based remuneration models.

Despite the recent clashes between clients and media shops over transparency issues, more respondents claimed to be most with their media remuneration models than any other agency type, per the report.

PR agency remuneration also shows a declining reliance on labor-based models in past seven years, with increasing usage of performance models.

 “Agencies are vital partners for many advertisers and the way they are paid is a critical step in establishing a productive relationship that delivers real return on investment while also offering agencies the chance to be rewarded for the success they help generate,” said Laura Forcetti, global marketing sourcing manager, WFA.

“The move to performance-based remuneration is  recognition that where agencies and advertisers are aligned in the same way, the outputs are more likely to be better for both,” she added.

The report also found 52% of respondents think they focus too much on remuneration and it has had a detrimental impact on agency relationships. Creatively oriented agencies would prefer to focus on return on investment, which delivers far greater value.

And transparency concerns remain, with more than half (52%) of the respondents not feeling that they are getting full transparency on their agencies’ costing models.

The complete report is available to WFA members via the organization’s website.