Best practices for benchmarking and assessment
Q: How often do clients review agency compensation?
A: 61% of advertisers do it every year
Q: How many clients are “Very Satisfied” with
their current compensation arrangement?
A: For media agencies = 38%
A: For digital agencies = 19%
One recent ANA study showed that many advertisers did not fully understand how much they were paying their agencies for specific functions and services. As one client said, “there is too much mystery and not enough transparency surrounding this subject”.
Only about half of all clients feel that their media agencies are transparent enough regarding costs and profit, while less than a quarter feel that way about their digital agencies. True or not, it’s a problem for the client/agency relationship.
Media and digital agencies have their own lexicon and confidential negotiating tactics. These agencies perform tasks that are somewhat alien to many clients, often speaking in terms that can sound foreign, with job titles that are unfamiliar. Without first-hand experience in this field it is difficult to place fair value on their work and therefore arrive at the most productive compensation agreement.
Drexler/Fajen & Partners are the only consultants to have run media and digital agencies and departments as well as media research, recruiting and consulting firms. Our knowledge and understanding comes from practical, first-hand experience with media and digital agency management of work, resources and talent.
We understand the economics that can produce better results and how benchmarking allows clients to have a better perspective on client/agency compensation. It’s like having an accountant who used to work for the IRS.
The Four Pillars of Benchmarking and Assessing
Media and Digital Agency Staffing and Compensation
1. CLIENT/AGENCY GOAL ALIGNMENT
2. FOUR-DIMENSIONAL SCOPE OF WORK
3. RESULTS-DRIVEN STAFFING PLAN
4. ACCOUNTABILITY COMPENSATION
1. CLIENT/AGENCY GOAL ALIGNMENT:
To understand a client’s objectives and to make sure the agency aligns itself with their goals requires a complete set of business, marketing and media guidelines. These form the foundation for performance expectations going forward.
2. FOUR-DIMENSIONAL SCOPE OF WORK:
A simple listing of the tasks the agency is to perform is not enough information to build the best staffing plan and supporting resources. For each task it is necessary to identify its priority, complexity, degree of expected re-work and timing of deadlines. This level of granularity assures that both client and agency understand exactly what is expected and when.
3. RESULTS-DRIVEN STAFFING PLAN:
An agency staffing plan is more than a reflection of the tasks involved. The center of gravity for a staffing plan should be the desired marketplace results and what it takes to achieve and measure them. This means evaluating the contribution of strategic and tactical staff, as well as their level of seniority and experience. Scope of work requires different levels of talent and each element must be evaluated in detail.
4. ACCOUNTABILITY COMPENSATION:
Agency compensation cannot just be measured on a comparative agency-to-agency basis or predicated solely on industry benchmarks. Benchmarks can be deceiving unless the necessary experience is applied to understand the balance between the risks and rewards related to both the client’s and agency’s financial requirements.
Salaries, overhead resource costs and profit margins are all necessary factors to evaluate, as well as incentives for incremental value and their attendant risks and rewards. What motivates an agency, what is practical and what can be measured and monitored to demonstrate marketplace results should be considered in every compensation review.