• by Joe Mandese , January 28, 2004

The weather outside might have proved frightful enough to force the Association of National Advertisers to cancel its Agency Relations Forum in New York City today, but the sentiment of marketers toward their agencies heading into the conference wasn't nearly as frightening as an initial report might have suggested. While preliminary findings of the report indicate that "issues" abound between marketers and agencies, "creative arrogance" so far is a relatively minor factor. A much bigger issue, said the nearly 100 marketers that have participated in the research, is that their agencies' work isn't "always on strategy." While the survey did not explicitly solicit insights on media vs. creative agency services, the ANA is collecting that data and expects to report such breakouts when it releases a final report April 20, when the Agency Relationship Forum has been rescheduled.

The report, Managing Your Agency Relationship, will be one of two important new sets of data to be released this spring by the ANA. The other will be the results of a 2003 study on agency compensation. Together, the two reports will serve as new benchmarks for marketers to manage their relationships with their agencies and for agencies to understand how to benchmark their own performance and seek fair compensation for it.

In fact, so-called "performance incentives" are expected to be one the most significant findings to come out of both reports, and executives familiar with the studies believe they could reveal a new tipping point for agency compensation formulas that could have a profound impact on the future of advertising services.

"We're coming out of a recession and recessions have a way of changing economic relationships," an ANA insider tells MediaDailyNews, noting that it was during the 1990-91 U.S. economic recession that the old method of media commission compensation tipped in favor of fees. As a result of the most recent recession, the executive says there may have been a profound shift toward performance incentive compensation formulas. Such formulas normally provide agencies a modest base, but reward them for delivering on or above certain pre-set performance goals.

Agencies, marketers and advertising management consultants have been exploring such approaches to come up with a mix that both controls marketing costs, but also provides agencies with incentives to deliver creative, marketing and media excellence.

While the new compensation study, which will be released in May, will likely reveal these patterns in detail, the agency relationship study also will reveal insights into the new compensation formulas.

"One of the things we are looking at is cross-tabbing the results between those who use performance incentives and those who don't," says Barbara Bacci Mirque, senior vice president-best practices at the ANA. "We want to see if the guys who use performance incentives are happier with their agencies than those show do not and why."

Similarly, she said the report will also utilize cross-tabs to show differences among types of agencies, including full-service, creative- and media-only, as well as other marketing services such as direct marketing and CRM shops. The results of the relationship survey will be published in an updated edition of the ANA's handbook Managing Your Agency Relationships, which is being written by Joanne Davis.