The World Federation of Advertisers is out with a new report on agency remuneration that finds most clients believe they’re getting value for the money they pay to ad agencies.
The WFA compiled the report with consultant Observatory International.
Overall perceived value is roughly in line with results found in 2018, the last time the report was conducted. This year, 86% of respondents to a survey for the report agreed “somewhat” or “strongly” that they get value for the money paid to agencies. In 2018 87% of respondents agreed somewhat or strongly with the statement about value.
However, this year there was a five-percentage point bump to 17% who “strongly agreed” they were getting value for their money, while 69% “somewhat agreed” they’re getting value versus 75% who felt that way four years ago.
Broken out by agency type for this year, responses were most extreme for media agencies. Nearly a quarter (24%) agreed “strongly” they were getting value, more than any other agency type. On the other end of the satisfaction scale 5% “strongly disagreed” that they were getting value for their money, revealing more extremely dissatisfied customers than for any other type of agency. 58% “somewhat agreed” they were getting value and 12% “somewhat disagreed.”
The report found that talent shortages, diversity and sustainability are having an impact on compensation levels in the sense that clients indicated they are prepared to pay more for all three. 64% of respondents say they’re prepared to pay more for higher diversity levels at agencies and 71% said they’ll pay more for shops that engage in sustainable business practices. 85% said they are prepared to pay more for top talent.
The report also found that the cost for digital services has risen sharply—as much as 50%-- since 2011 when the WFA first started doing the report. CRM services have also risen sharply per the report.
Compensation based on labor and performance have gained ground since 2011 with labor/hourly rate arrangements continuing to fall out of favor. This year 22% of respondents said they preferred labor/performance payment terms compared to just 9% in 2011. 33% said they remained in favor of labor/fee-based compensation for their agencies versus 87% in 2011.
The average payment term is around 60 days per the survey, but the report notes it may be longer given that a lot of work begins before a purchase order is issued. And the report acknowledges that terms should be shorter.
“It’s not unreasonable for a small agency to expect 30-day payment – and for larger agencies to look to 45 – and certainly no more than 60,” the report states.
The full report is available only to WFA members.