Advertiser concerns about how agencies are remunerated and transparency over costs have hit record levels in the UK only months after the US ANA report suggested a ‘fundamental disconnect’ in the client-agency relationship.
Fewer advertisers (46%) are satisfied with the commercial arrangements they have with their media and creative agencies than at any time in the past 15 years, a UK study of 56 global companies has revealed.
Paying for Advertising, an ISBA and Advertising Research Consortium report that has run every three years since 1997, also found advertisers have become increasingly dubious about agency cost transparency and profit margins.
Only 22% of advertisers (a record low) say they are satisfied agency costs are transparent and only 31% (down from 40% in 2012) are aware of the profit margin agencies make on accounts.
ISBA director of consultancy and best practice Debbie Morrison told UK trade publication Campaign the increasing influence of procurement in client-agency negotiations has placed greater pressure on agency remuneration models and resourcing, with commission-based structures now virtually dead and payments-by-results (PBR) on the wane.
The dominant remuneration model is a resource fees structure with projects “the new kid on the block”.
Morrison is concerned by the demise of PBR, which now accounts for only 43% of agreements, but says this is more likely down to no-one being able to find a mutually suitable PBR solution rather than the concept going out of vogue.
Although advertiser satisfaction over pay is 15-year lows, the report found pay rates for agencies have improved in the past few years. The equivalent net rate paid for creative work increased to 7.8%, up from 5.9% in 2012, a sign that marcom procurement-led pitches have eased off.
In addition, media agencies are being given more media planning work (92%, up from 77% in 2012) and strategy (85%, up from 61% in 2012). Commission rates have also gone up from 3.5% in 2012 to 4% this year.
Have something to say on this? Share your views in the comments section below. Or if you have a news story or tip-off, drop us a line at adnews@yaffa.com.au
Sign up to the AdNews newsletter, like us on Facebook or follow us on Twitter for breaking stories and campaigns throughout the day.