There has been a lot of industry discussion of agency performance incentive compensation and payment by results. However, there is little recent agency information on the prevalence of such arrangements, their structure, and their economic impact.
To shed some light on this important issue, the association conducted its first-ever 4A's Survey on Agency Performance Incentive Compensation Payment by Results (PBR).The survey features results from 168 member agencies, representing 600 client relationships. It provides information on many aspects of incentive compensation including prevalence, structure, and amount; correlation with business relationship and base compensation; agency/client relationship management; and performance incentive criteria.
Agencies and marketers are interested in evolving legitimate performance incentive compensation. Based on the findings of this 4A's survey, incentive compensation arrangements are not prevalent in most agency-client agreements and do not represent, in aggregate, a significant impact on agency revenues.
The industry would seemingly be well served to focus efforts on expanding robust, formal, two-way relationship management processes as the initial step in aligning interests between the parties. Inculcating comprehensive relationship management arrangements can and should help create management alignment, dialogue on key performance indicators and the framework for establishing the appropriate range of performance expectations.
Alignment of economic interests between an advertiser and their agencies is an important and worthy goal. However, to date, the industry has not cracked the code. The 4A's provides insights on how agencies and marketers can best evolve alignment of interests.
See complete 4A's Survey on Agency Performance Incentive Compensation Payment by Results (PBR). If you have questions about the survey, please contact Tom Phelan at firstname.lastname@example.org or Helen Miranda at email@example.com in Management Services.