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WFA members evolve media agency remuneration strategies

Greater emphasis on regional contracts and payment for results; increased frequency of evaluation and use of financial auditors

/ Introduction

Brussels, September 29: The World Federation of Advertisers has released the results of its latest survey into the way that the world’s biggest advertisers pay for media agency services.

The first such survey since 2008 indicates that WFA members – half of those surveyed have responsibility for spends of more than $1bn a year – have made notable changes to the way they pay for media planning and buying.

Although the survey only reflects the responses of 27 advertisers, the findings are indicative of the way the world’s biggest advertisers are changing the way they pay for media agency services. Respondents were responsible for nearly $30bn in gross media spend and such large multinational brands often have the most sophisticated relationships with agency partners.

Key changes include:

  • Greater emphasis on regional rather than country specific appointments – The proportion of clients who appoint a media network/group regionally has risen from 23% in 2008 to 36% in 2011. The number of brands making global appointments has not changed since our previous survey and also remains at 36%.
  • A clear shift away from agency commission – offline media remuneration has shifted away from rewarding spend towards rewards for results. Thirty-three per cent of those surveyed now use an element of payment for results such as sales or brand KPIs for offline media buying (the figure is 25% for online). Eighty-two percent of those who use this method as part of the remuneration specify sales as their key KPI.
  • Greater emphasis on real performance – Elements such as sales or media buying performance now represent an average of more than 20% of total remuneration, with 48% of those surveyed saying it was worth 10-20% of total remuneration. Twenty-four percent of those surveyed said it was worth more than 30% of total fees.
  • More frequent check-ups – Marketers are assessing the performance of their media agencies far more often. Thirteen per cent of agencies are now assessed more than twice a year. In 2008, no WFA member said they evaluated this frequently. The number of advertisers who formally evaluate performance twice a year is now 57%, while the number who assess delivery just once a year has dropped from 36% to 30%.
  • More specialist help – More clients are considering using specialist financial auditors (rather than media auditors) to tackle the issue of hidden media rebates. In our 2011 survey, 56% of those who responded were now using financial auditors.

Said Stephan Loerke, WFA Managing Director: “The world’s largest advertisers usually have the most sophisticated remuneration contracts with media agencies. The changes that they have made in the last three years indicate two on-going priorities for our members: transparency, which is driving more frequent performance audits and the use of specialist financial auditors, and the need to deliver real results, which is encouraging clients to give agencies a stake in improving sales.”

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