Industry publishes joint report on agency remuneration

The guide provides an update to the original 2005 edition and takes into account the development of more complex and hybrid agency remuneration models as clients seek to provide more value-based efficient relationships. This edition also acknowledges the need both for clients and agencies to provide more flexibility in providing effective marketing campaigns on slimmer budgets and recognises the increasing role that procurement plays in the remuneration process.

Sections within the guide include:

• A ten-point checklist of the qualities shared by best practice remuneration agreements.
• The principle payment systems (including retainer fee, project fee, variable fee based on actual time spent, scale fee and bonus, consultancy and concept fees, licensing fee, output or ‘off-the-shelf’ rate fee, and commission fee, often in conjunction with payment by results (PBR) or  value-based remuneration), alongside a summary of their advantages and disadvantages.
• A summary on the importance of scoping out the work and internal agency costing before remuneration is set or work commences.
• The difference between setting agency remuneration in a new relationship and an existing one.
• An example of how to remunerate an agency.

Says Colin Fleming, Chairman, IPA Finance Policy Group and Chief Operating Officer, AMV BBDO: “The number of remuneration models utilised by clients and agencies has increased since the Agency Remuneration guide was first published. Indeed many of the models currently utilised are a hybrid of multiple models. Previously most models had a commission component. But Payment By Result (PBR) is now the most common thread between models. It is important that PBR truly rewards top results. The introduction of PBR to agency remuneration should therefore contribute a risk/reward component to the model, rather than just adding risk only. In reiterating some guiding principles and outlining some of the new models this update to the guide will act as a useful tool for those about to discuss agency remuneration.”

Says Debbie Morrison, Director of Consultancy & Best Practice, ISBA: “Advertisers are constantly searching for remuneration nirvana and are consequently always interested in what's new that they can experiment with and adapt for their own agency relationships. All sides of the industry should find this contemporary update helpful in summarising the available options.”

Says Scott Knox, Managing Director, MAA: “Helping clients and agencies act more effectively in what is a distressed economic environment is vital. This best practice guide addresses maintaining the balance between remuneration for outstanding ideas and improved accountability during tough times.”

Says Francis Ingham, Chief Executive of the PRCA: “Client-agency relationships should reward the agency proportionately to the value they provide to the client. That value can be measured in different ways as varied as time, creativity, financial return or even a combination. This guide provides a great introduction into some of the more common ways of structuring agency remuneration and developing a mutually beneficial relationship.”

The guide is free and can be downloaded here. It will also be available on the Good Pitch; a global industry portal for information and sharing of practices on agency pitches.

For more information about the issues surrounding agency remuneration, read IPA Finance Director Alex Hunter’s opinion piece on MediaTel.

There are five additional joint industry guides available, all designed to help clients to get more from their communications agencies. These include: Finding an Agency, Briefing an Agency, Communication Strategy, Judging Creative Ideas, and Evaluation. Full details.

The IPA is the trade body and professional institute for 250 UK advertising and marketing agencies which together manage media and marketing budgets valued at over £30 billion per annum.

For more information about ISBA, visit: www.isba.org.uk
For more information about the MAA, visit: http://www.marketingagencies.org.uk
For more information about the PRCA, visit: http://www.prca.org.uk