ANA 2004 Agency Compensation – Client Gravitation Toward Fee-Based & Performance Incentive Models.

Advertisers are continuing to move away from commissions to fees or other methods of compensation, including incentives, according to the Agency Compensation Survey published by the Association of National Advertisers (ANA). The findings were first presented today at ANA Financial Management Conference in Scottsdale by David Beals of Chicago-based client-agency relationship consultancy Jones Lundin Beals, Inc.

According to the 2004 ANA Agency Compensation survey, a mere 10% of the 112 major advertisers surveyed said they still pay commissions, down from 21% in 2000. Nearly three quarters (74%) rely on either fixed/hourly fees or a blended compensation model that includes fees and commissions (8%).

Advertisers continue to increasingly use performance incentives to compensate their agencies, the survey found, although at a slower rate than in previous years. Some 38% of respondents use performance incentives for one or more of their agencies, up from 35% in 2000. This increase appears to be having an impact on agency performance as well – 68% said that incentives improved performance, up from 58% in the last survey.

There has also been a significant increase in use of “agency-specific” measurement criteria. Sixty-three percent of advertisers report they evaluate their agencies based on brand/ad awareness (up from 50% in 2000), while 40% said the same for brand perceptions (23% in 2000)

“This is an indication that incentive plans are being fine-tuned to more closely align with specific agency deliverables within the marketing plan vs. broader sales goals,” said Bob Liodice, President and CEO of the ANA. “Advertisers are increasingly looking at performance across a number of key metrics, both hard and soft, which means they’re looking much more closely at fine tuning their ROI. The change results in more appropriate agency compensation and effective marketing results.”

This year’s ANA Agency Compensation survey also looked at media agency services in greater detail than prior studies. The research found that such services, especially media buying, are increasingly likely to be handled by a specialist firm separate from the creative agency, particularly among the larger advertisers. Media planning is more dispersed – 41% use an agency in the same organization where their creative is handled, while 43% use an unaffiliated agency.

Finally, the ANA research found that about half of all respondents said they conduct media audits, usually annually. Slightly less than half of advertisers (41%) use their internal auditors.

For more information at http://www.ana.net