Dive Brief:
- The Association of National Advertisers (ANA) released its latest "Trends In Agency Compensation" report and found that media commissions are again on the rise as a preferred agency compensation model among marketers, according to MediaPost Communications.
- Media commissions have historically been a primary compensation model but were used by just 3% of marketers in 2010. Commission rebounded to 12% of compensation models in 2016, the ANA said.
- The fee-based commission model is on the decline, however, dropping from 81% of use in 2013 to 68% last year. The report additionally noted that "incentive" models do not improve agency performance; that value-based compensation reappeared in use with 7% of marketers after an absence in the past two ANA surveys; and that more marketers are compensating multiple agencies at 1.85 agencies each, on average.
Dive Insight:
The ANA report points to the overall volatile nature of agency compensation, which is reflective of broader shifts and disruptions in the traditional agency-client marketing model. Right now, traditional ad agencies are being challenged on a number of fronts, by brands taking marketing activities in-house and also management consultancies like Accenture and Deloitte encroaching on their territory.
Many agencies have struggled to adjust to the demands of a digital-first marketing world, but they've also been mired in controversies stemming from a lack of transparency in compensation, which notably manifested in the form of undisclosed rebates reported on explosively by the ANA last year. Recalibrating compensation models is just one way marketers are testing and changing the way they work with agencies to best fit their business.
The reappearance of investment in value-based compensation is interesting, pointing to a growing emphasis on quality of work over sheer volume. While the ANA found many marketers work with multiple agencies, that might also be set to change amid a demand for agency relationships to get simpler and more streamlined.