Paying for Advertising VI

Creative Agencies (2013)

Paying for Advertising VI shows advertiser-agency relationship under record strain.

Latest research - by ARC in collaboration with ISBA - into how advertisers pay their creative and media agencies and what they think of the commercial relationships they have with them provides the starkest set of results yet over a 16-year study period.  In-depth surveys of ISBA members and other major advertisers (representing over £2 billion ad spend) demonstrates a deteriorating relationship in agency remuneration that could be symptomatic of a broader discontent characterized by a worrying erosion of trust and satisfaction from clients towards their agencies.

Headlines from Paying for Advertising VI:

Average net rates paid for UK-based accounts have reduced significantly

Creative agency charge-out rates have typically reduced since 2009

The average mark-up on production has increased significantly

Use of Payment by Results at the creative agency has reduced, with potentially less upside

More clients believe they pay more than they should

Fewer clients believe their agency’s profit goals are fair

Fewer clients find their remuneration agreement adaptable or simple to administer

Just one-half of clients are satisfied with their creative agency agreement – the lowest since records began in 1997

The vast majority of advertisers changing their agreement have changed the scope of services required

 

Professor Jonathan Lace, author of the report, said:

“Over many years (and in other country surveys conducted by ARC) client trust and satisfaction with the remuneration agreement have been highly correlated. That is what you would expect, but for the first time it is no longer the case.  Now client satisfaction is linked to whether the agreement provides incentive for agency efficiency and whether the client believes they pay too much.  Marketers and client procurement are seeking efficiencies right through the value chain in the multi-agency multi-channel world.” 

Debbie Morrison, ISBA’s Director of Consultancy & Best Practice, said:

“Our research makes pretty grim reading for advertisers and agencies, and will resonate strongly with the commentary we have seen over extended payment terms. The level of trust advertisers have towards their agencies is at its lowest ebb since we started recording this data, with a lack of transparency the key influence.  Marketing seems to have ceded control to procurement, which could be behind the cultural shift towards a commoditisation of the agencies clients employ.”

Paying for Advertising VI highlights that there are fewer Payment by Results schemes on offer to agencies, with fewer schemes paying out 50% of the bonus. Morrison concluded:

“While our sluggish economy provides the backdrop to these stark results – with clients clearly hardening their commercial positions – it is still within the gift of agencies and advertisers to improve their relationships. At the core of this is how the advertisers ‘ value’ creative and, equally, how agencies demonstrate their value. Our research does signal a willingness by clients to pay more for agencies that can offer more rounded, integrated offerings – perhaps this will offer some agencies a glimmer of hope.”

 

 

ISBN 978-0-9552447-8-0 Price £450.00