Advertisers shift away from commissions: WFA

Of the 27 advertisers (responsible for a combined media spend of US$30 billion a year) who took part in the WFA survey, 36 per cent now appoint media agencies and networks on a regional basis. That is a significant increase from the 23 per cent who did so in 2008, the last time the WFA performed this research.

The proportion of brands making global agency appointments remained at 36 per cent, unchanged since 2008.

Much clearer has been the shift away from commission based remuneration schemes since 2008. Both advertisers and agencies have been keen to move away from contracts that effectivly reward spending only, in favour of remuneration criteria that depend on actual results. 33 per cent of the 2011 respondents now use elements such as sales or brand performance indicators for offline media buying contracts. Of those, 82 percent specify sales results as the most important key performance indicator.

Overall, elements such as sales or media buying performance now represent an average of more than 2 per cent of total remuneration for media agencies. 48% of those surveyed said it accounted for between 10 per cent and 20 per cent of total remuneration, while 24 per cent said it was worth more than 30 per cent of all fees.

With a greater results-based payment structure, advertisers are also finding themselves checking up on their media agencies with greater regularity. According to the survey results, 13 per cent of agencies are now assessed formally more than twice a year - no respondent had said they were audited so frequently in 2008.

Meanwhile, 57 per cent of advertisers evaluate agency performance twice a year, while 30 per cent do the ritual on an annual basis.

Stephan Loerke, managing director of the WFA, said the world's largest advertisers have always had 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,” he said.