Most marketing and advertising agencies receive fixed or labor-based payment for their work, rather than commission-based payment, according to recent research from the Association of National Advertisers (ANA).
The report was based on data from a survey conducted in December 2016 and January 2017 of 82 marketers with knowledge of 1,167 client-agency compensation agreements.
Respondents were asked whether they use six common types of marketing/ad agency compensation structures: commission fixed rate (a percentage of media billings and markup on production costs); commission sliding scale (payment varies based on the level of media spending); fixed/output-based fees (set payment is negotiated for a specific project/time period with additional costs billed at net); value-based fee (price is established based on the value, not the cost, of the services and work provided by the agency); labor-based fee (price is determined by the amount of labor time multiplied by a negotiated hourly labor rate); and sales commission (agency compensation is a percentage of the brand's sales).
Marketers say 68% of their agency compensation agreements have a fee structure (fixed or labor-based), 12% have a commission structure (fixed or sliding scale), and 20% are structured based on other methods (value, etc.).
Compensation structure varies significantly by agency type, the analysis found.
For example, 24% of compensation agreements with media planning/buying agencies are commission-based, whereas just 6% of compensation agreements with creative agencies are commission-based.
Compensation structure also varies by the type of services being provided.
For example, commissions are more frequently paid for programmatic buying, traditional media buying, and planning services than for social media and digital services.
About the research: The report was based on data from a survey conducted in December 2016 and January 2017 of 82 marketers with knowledge of 1,167 client-agency compensation agreements.