The ANA (Association of National Advertisers) today released what it billed as being the first-ever Global Agency Compensation Survey, revealing new insights about how global marketers structure and manage compensation practices with their advertising agency partners. Results of this benchmark study, which polled marketers operating in nearly 40 countries across all continents, in many cases mirror U.S. practices. The study found:
o Fees are the dominant method of agency compensation globally practiced by 57 percent of respondents. An additional 37 percent of respondents utilize fees in combination with commissions.
o Although many marketers use traditional media commissions in combination with fees, no respondents to this survey indicated that they use only traditional commissions to compensate their global agencies.
o New methods of compensation, like value-based remuneration, have not taken hold globally. Only 4 percent reported utilizing them.
o Half of respondents now employ performance-based incentives (46 percent in the U.S. compared with 49 percent globally).
Key differences
Important differences, however, emerged in the survey:
o Far more global marketers employ a combination of fees and commissions than in the U.S. (37 percent vs. 6 percent). According to David Beals, President and Chief Executive Officer of R3:JLB, who worked with the ANA and analyzed the results of the survey, two factors are contributing to this finding:
o In markets like Japan and Brazil, commissions are still the dominant compensation practice.
o In smaller markets, where client marketing investments are less predictable, marketing spending does not easily allow for ongoing retainer-based compensation.
o Global marketers are considerably more likely to base incentive criteria on metrics such as media delivery, brand perception, digital delivery and copy testing, and far less likely than in the U.S. to employ sales metrics as a success criterion.
Benchmark value
“With this groundbreaking survey — the first-ever conducted on a global basis — the marketing community now has a vital benchmark to track worldwide approaches and innovations in how marketers compensate their agency partners,” said Bob Liodice, president and CEO of the ANA. “Global marketers will now be better able to understand how their peers are wrestling with the challenges of compensating agencies across diverse countries, cultures and conditions.”
In negotiating, overseeing and tracking agency compensation, global marketers in the survey noted a spectrum of management models, from centrally-managed at corporate headquarters, to regionally-managed by divisions, to locally-managed at the individual country level.
Only a quarter (24 percent) manage their global agency compensation via a central, headquarters-driven approach.
About half (48 percent) employ a combination approach — involving central, regional and local operational resources — to manage their global agency compensation.
Furthermore, 75 percent of global respondents report that corporate procurement departments are significantly involved in the management and negotiation of agency compensation. Of this number:
o 47 percent say the process is procurement-led with marketing support
o 28 percent say the process is marketing-led with procurement support
“While many global marketers may establish their approach to agency compensation at corporate headquarters, most need to rely on their regional and local operations, in combination with their procurement colleagues, to effectively address significant differences in local costs, practices, laws and cultures,” said David Beals, president and CEO of R3:JLB.
Challenges
The respondents to the survey provided a long list of open-ended responses that suggest acute challenges associated with managing global agency compensation, including:
o Gaining alignment on goals, strategies and approaches, both within the client’s organization and between the client and agency global operations
o Effectively addressing the needs of both the global organization and its local operations
o Dealing with country-by-country differences in compensation rates, languages, cultures, laws and practices, as well as with the “I know what is best” local mindset within client organizations
o Structuring and managing performance incentive compensation arrangements that address both global and local region / country goals and needs
This ANA Global Agency Compensation Study was fielded online in February and March of 2012. In total, 71 client-side marketers participated from global marketing organizations including Brown-Forman, Dell, Ford, IBM, Intel, Johnson & Johnson and Merck.
