COMMENT: Moving to fees is in the best interest of agencies and clients

One of the extraordinary anomalies of the contemporary advertising business is that it is still largely based on a compensation system which was designed in the coffee houses of London in the 18th century. The agency commission system - and the 15 per cent rate which accompanies it - is still the preferred method of clients to pay for advertising in Asia. In North America, we estimate 30-40 per cent of compensation is now feebased; in Asia, outside of the US- based multinationals, fees hardly exist in advertising. Where commissions yield to fees, the usual result, in my experience, is that clients save money and agencies are guaranteed a proper return. It sounds like a win-win. So, how come so few Asian advertisers and agencies are prepared to dance the fee tango? Well, let's take the worst possible view. First, it seems like too much hard work for the client. Let's face it, the commission system is easy; you just negotiate the rate - and ignore everything else. Second, there's just too much greed on behalf of the agencies: you never know when commission might yield windfall profits. Actually, there is some truth in both stances. Fee systems do need effort to make them work, particularly in the early days; they can require more administrative support. And, when agencies often perform small advertising tasks at a loss, there must be some attraction in raking back revenue from a big "commission run". But I do not believe this situation to be healthy in the long-term. It essentially de-professionalises the relationship between advertiser and agent. Unlike normal professional engagements, scope of work becomes replaced by abstract notions of service. Yet, a mutually agreed scope of work is the single best way for defining expectations, and for matching remuneration to the actual activity, and to the level and quality of the participants. Fortunately, from my perspective, there is a trend at work tending towards consideration of fees, and that is the increasing integration of communications disciplines. Quite simply, if a client is buying services from one menu, it becomes much less attractive to pay for them in different currencies. Except in markets such as Japan, where an entrenched commission system and a weak specialist sector has allowed agencies to give away other services as loss, I can see the disciplines and benefits of labour-based compensation slowly taking root in clients' consciousness. We should do everything we can to accelerate this. If you believe, as I do, that ultimately the future of our business lies in being the repositories of out-sourced work from slimmed down marketing departments, then the sooner we make the change from the ambiguous role of media owners' agent into being genuine professional services firms, the better. Clinging on to the past is something agencies are quick to condemn in others; but it seems difficult to behave as bravely in their own back-yard. It shouldn't be.

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