Nicole Rizzo, senior vp of business intelligence and insight at the 4A’s, noted that the evolution of compensation hasn’t changed much since the 1990s, although it has gotten a bit better, moving from commission and cost plus to hourly rate, but she added that almost 50% of agencies are still doing something labor-based.
“A lot of our members are actually hiring staff-based pricing experts to try to get something new, and the industry is moving so fast with technology, it’s really just a matter of time that it’s going to accelerate the need for change,” said Rizzo.
Laying out the options
The study states that navigating the unknown of changing compensation models can be difficult, from financial risk to changing entrenched practices to measuring benefits of each model and return on investment. But the potential benefits of reshaping relationships into more strategic partnerships can outweigh the challenges. “Like all substantial transformations, success is entirely dependent on achieving alignment among all of the key parties—in this case the agency, marketer and marketing procurement,” said the study.
It then categorizes the many compensation models into three main types: output-based, input-based and performance-based.
While no one model is correct, the study breaks down each model and sub-model into understandable phrasing and its core components and factors. It then divides it into pros and cons so everyone can easily comprehend the advantages for their needs.
