Around 17 percent of advertisers believe their agency partners are offering value for money in 2022, according to research by the WFA and The Observatory International. The Global Agency Remuneration Trends report found a 5 percent uptick in the perceived value of brand-agency relationships, compared with 2018.
However, the WFA noted that 5 percent of major advertisers strongly disagree that media agencies represent value for money. Criticisms included “a lack of original thinking and a habit of rolling out the same solutions year after year”, leading some respondents to question overall value (rather than performance).
The findings were drawn from 200 senior marketing executives representing 84 companies, with a total global annual ad spend exceeding $136 billion. More than four in 10 respondents reported significant increases in prices for digital and CRM services, with costs for digital work climbing by up to 50 percent.
But the study also revealed that 64 percent of marketers are willing to pay more to agencies that meet diversity quotas, 71 percent for sustainability goals and 85 percent for talent targets. “It’s great to see that more clients want to reward not just performance but also quality through sustainability, diversity, and talent,” said Laura Forcetti, Director of Global Marketing Sourcing Services at the WFA.
“Bad behaviours”
Meanwhile the WFA observed that procurement continues to take the lead on agency negotiation, though “responsible” levels have fallen by 12 percent since 2018. The study suggested that marketers stepped in to protect their agencies during the pandemic, and the role of procurement is expected “to rise back up significantly” in anticipation of a recession.
The results showed the average payment term across all disciplines is around 60 days, adding that this figure can fail to take into account the time that some advertisers take to issue POs. The survey revealed a “staggering” 82 percent of work being commissioned without POs, suggesting that “the reality is probably longer for many.” The WFA highlighted the complicity of both clients and agencies in these “bad behaviours”.
“One caveat is that we too often focus on the model being used and the fee being paid,” added Forcetti. “What matters is the whole remuneration ecosystem, including the speed of issuing POs and payment terms. Some advertisers have very complex systems and even if the remuneration model is attractive, it can be a real struggle for agencies to see the money in their bank account.”
That said, the report called the results “reassuring” in light of the financial disruptions caused by the global pandemic. “In the main there continues to be a balanced approach to remuneration,” said Stuart Pocock, Co-Founder of The Observatory International. “Given the global forecasts for 2023, however, it will be interesting to see if the status quo is maintained as pressures grow [for] both clients and agencies.”
