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Exuberant advocates help move remuneration ideas forward

Exuberant advocates help move remuneration ideas forward
One week on David Wethey, Chairman of Agency Assessments, looks back at an enormously constructive Performance Adaptathon.

It was an overwhelming victory last Tuesday – and I’m not talking about Brazil 1 Germany 7. The IPA’s Performance Adaptathon (in association with ISBA) was about paying agencies.

The chosen theme was “Less time-based, more value-based”, and in the show of hands at the end, only one delegate wanted to stay with people hours fees as the default setting.

This was the fourth event in President Ian Priest’s series of change management initiatives, and a resounding success. The Altitude London venue, with its inspiring aerial view of London, was ideal.

The BBC's Evan Davis compered the show with style, wit and a cutting edge, the speakers were excellent and the panel sessions worked – which doesn’t always happen. As did the afternoon breakouts.

There was a full house of senior players. It was a pity that so few senior marketing clients turned up, but the agency business is surely about agencies, in the same way that the hotel and airline businesses are about hoteliers and airlines, not guests and passengers. In any case, the Adaptathon generated remarkable buzz and bonhomie, and most people stayed to the end of the day.

Evan suggested that our industry possibly needed something radical, like the NEC3 contract system in the construction industry, which allows for real-time adjustments on a daily basis.

Ian opened by explaining that his agenda was Provoke, Explore, Inspire, Investigate and Experiment. That is how our day had been planned and it worked very well indeed.

He started with Provocation. There is good news. The Bellwether reports are now showing growth in marketing communications budgets. Market analysts are apparently exhibiting more appreciation for the value of marketing.

The recent high level IPA/ISBA workshop on remuneration accepted the importance of pursuing value-based solutions, as an alternative to input cost. Ian recommended flexibility and an open mind to different solutions, with a preference for the fair, the simple and the measurable. He announced a draft joint industry remuneration charter, which is to be circulated and debated.

The keynote address by Pernod Ricard Group CMO Martin Riley (President of the WFA) highlighted a slight drop in the percentage of agreements on a time basis in a recent WFA global remuneration survey. But 51% of WFA members still use the traditional method.

Martin said he sympathised with agency concerns about no longer having direct access to client top table. To win this trust, agency leaders have to understand the client’s brands, which inevitably takes time. Clients don’t want inflexibility, counting the hours, or agencies that are more corporate than the corporates.

Riley gave us a shopping list for his ideal agency of the future: Creativity (‘work that makes a difference’), Challenge, Connection to the client’s business, Continuity and Cultural fit.

He fully recognised the role of agencies in building brands, and deplored clients pitching too quickly and too often. He also echoed Jim Stengel (formerly of P&G) in admitting that global marketing companies move their own people too fast, which can make partnering difficult for agencies.

Exploration continued in the next presentation by Marketing Consultant Peter Field, drawing on 10 years evidence from the IPA Databank. It was outstanding! He proved that it is possible to deliver a serious lecture entertainingly at a big conference. Some highlights of his thesis on outputs:

  • You need a balanced scorecard.
  • To maximise profitability, brands need both long-term brand building and sales activation.
  • Pricing is a critical weapon, and emotional engagement is essential, because it can add value.
  • Fame – outstanding ads outperform normal ones by 4:1.
  • Awards – he quantified the Gunn Report by explaining that creative awards are not for vanity. They can help an ad outperform by as much as 10:1.
  • Enhancing effect of digital and social in conjunction with breakthrough creativity.
  • Negative effect of pre-testing: brand-building creative takes time to work, and looking for short term upturn leads clients to favour activation over strategic creativity.

There was then a panel session on the ‘Explore’ segment, involving Martin, Caroline Johnson of The Clear Partnership, who are pioneers in transforming agency process to adopt value-based pricing, Martin Telling (CFO of Omnicom Media Group and a big advocate of staying with time-based remuneration), and brand valuation expert David Haigh, Founder of Brand Finance. This was one lively debate.

Caroline explained that the legacy business model used by most agencies affects culture and behaviour – not just the way they charge. She advocates agencies ‘investing’ in the long-term success of client businesses and being paid on outcomes.

Haigh disagreed. He pointed out that agency stars are relatively underpaid, largely because fees are easy for procurement to reduce in an over-supplied marketplace. He advised against hoping clients would pay for success down the road, and recommended premium pricing NOW! The floor was not convinced how easy that would be to pull off.

We then moved into Inspiration with the presentation of three case histories. Debbie Klein of Engine and Amanda Morrissey of AKQA shared their fruitful journeys towards Value Pricing – in both cases in co-operation with The Clear Partnership.

Engine had been responsible for some stunning marketplace successes, including Orange, Mini and 118 118. They were rewarded for Orange and Mini only with conventional fees, although they won new business on the back of the shop window.

For 118 118 they benefited from an uncapped incentive scheme, and this encouraged the agency to pursue value pricing. Debbie also shared her pet hates (e-Auctions and blended prices).

Amanda's AKQA journey involved re-engineering the agency: client list, structure, talent base, and roadmapping towards a new way of engaging with clients. Her goal is to be her clients’ most collaborative partner.

Alexia Clifford, the client from Public Health England, Jane Asscher from 23red and Pete Buckley of MEC took us through the story of ‘Change for Life’, which required sustained behaviour change on all sides to deliver, not just a highly successful campaign, but a precisely measured high performance series of relationships.

The final element of Inspiration was an entertaining video showing multiple examples from the US and Canada of new compensation solutions from clients and agencies, presented by well-known global expert Tim Williams.

Then immediately before the lunch break, Evan discussed the morning’s programme with Debbie, Dominic Grounsell of RSA (ISBA Executive Committee), Julie Mortimer of Mills & Reeve (who gave a perspective on how lawyers pitch and are paid by their clients) and yours truly.

I might have mentioned that it is going to be difficult for agencies to get top dollar from their clients, as long as they spend so much time and resource giving away some of their best ideas to other people’s clients at the pitch!

The afternoon was given over to Investigation and Experiment – three AdaptLabs, one on time-based remuneration, chaired by Martin Telling, one on value-based, chaired by Deborah Cornwall (Head of Marketing, FM & Retail Procurement at EE), and one on risk-based, chaired by Nigel Vaz, MD of SapientNitro.

I sat in the third group. Our table was extremely experimentally-minded, and I was struck by how well this format worked, although inevitably successive distillations took a lot of bright ideas off the table.

A very stimulating morning would have encouraged lateral thinking anyway, and we were also helped by short presentations from Nigel, Adam Arnold from Zag, Simon Devonshire of Wayra and Duff Borer of Starcom MediaVest Group.

As Evan and Ian delivered their brief summings-up, I was struck by just how much ground we had covered in the eight hours we had been in our treehouse atop the Millbank Tower.

No wonder we were full of ideas and enthusiasm. And no wonder we were tired. A friend said to me as we exited, ‘my brain is completely full up!’

David Wethey is Chairman of Agency Assessments International.

Check out our Performance Hub and get involved on Twitter using #ipadapt.

If you want to write a blog on the issues raised, please email matthew@ipa.co.uk

Last updated 15/07/2014

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