 "Pay and productivity")
Creative output is best judged by the market: Babita Baruah
As an industry we have moved away from the commission-based remuneration model (where the client paid the agency a percentage of the total media spends on the campaign executed by the creative partners) to a retainer model (where the client pays the agency a pre-decided amount on an annual basis). With the new media landscape and the increasing importance of media agnostic integrated communication ideas, the dice is loaded in favour of the retainer model that drives brand ownership, value creation and collaboration.
With retainers, the conversation around the economics of the exchange are taken off the table at the very beginning. Clients and partners can then proceed to building a successful marriage. There is a sense of ownership on behalf of the agency, a sense of loyalty that comes only with a longstanding relationship.
The retainers work very well in most cases. Except when there is a mismatch of expectations, questions on the agency output and value creation. Value creation and output must be and in most cases, is quantified at the very start of the agreement. Broad parameters are tabulated for the purpose of evaluation at the end of the year, either to discuss bonuses or possibly to serve as a base for the contract to be renewed the following year.
However, as creative output goes, how do you really quantify it? The market is the best judge of the work and if the needle shifts, one can see the impact. Most clients, especially the ones we have on retainers, invest heavily in tracking metrics like ad trackers, brand health trackers etc. They can keep tabs on the efficacy of a particular campaign using these metrics. In my view, a controlled environment is a tried and tested method for research, but at the end of the day it is what it is - controlled! The true test lies in the shelves and in consumers' lives - the difference we have created as market leaders.
Retainers are also becoming important in a fragmented media environment. Every client has on-board several specialised agencies today. For a holistic marketing plan, it is essential that each of these partners collaborate. It is imperative that agencies work together to deliver the best plan to the client. We, at JWT, have held several joint briefings with our clients, with all partner agencies ( media, digital, activation, PR) present in the same room. The advantage is that ideation may be a collective effort but execution is left to the specialised agencies. Such open collaboration is more encouraging on a retainer basis where the partners are not solely concerned about staking claim to ideas and proving itself better. One brand, one agenda - that's how it works the best.
The variable component will play a large role in remuneration: Sanjay Tripathy
The remuneration structure for creative agencies has evolved quite a bit in the past couple of years. We have gone from compensating based on a percentage of media spends to retainers or even project-based remuneration. This has been a result of many factors playing at both agency and client ends - lower spends in certain industries, the movement of media monies to different, newer avenues and agencies themselves becoming more specialised.
Retainers work best when the quantum of work is fixed. However, the quantum of work alone can't be enough to judge the output from an agency and creative agencies cannot restrict themselves to developing communication but contribute to the larger objectives of the brand. Considering that the sought after talent at the agencies is mostly at the top rung, getting strategic thinking and quality work on various projects is always a challenge. The other side of the story is that sometimes agencies get overloaded with work and multiple iterations in this fixed model.
It is always easier to compensate what you can easily measure, objectively. Media starts with the marketing objective, provides data to back every recommendation and of course the plans are tracked and measured at regular intervals to course-correct and learn for future campaigns. They seem to have a better handle on the return on the investment by the client.
Retainers do not put the onus of improvising and delivering beyond expectations. Like any other corporate situation, you can only get the best out of an individual when you incentivise her. Hence, I see the variable component playing a large role in the agency remuneration, with periodic reviews to ensure expectations match deliveries and course corrections happen along the way.
While creative is highly qualitative in nature, it is important to put some structure to evaluate the output. Some of greatest companies around the world look at creative from one major filter: Is it in line with the brief? Second, is the benefit being communicated in the best possible way? An innovative creative can communicate effectively hence leading for better RoI for the campaign. The other measures are on overall agency performance. The review I mentioned earlier should consist of parameters covering both strategy and execution, and help document expectations and the minimum standard of delivery.
Shelf life of the campaign should be defined. Usage beyond that must be charged: Manish Bhatt
The classic 15 per cent commission model was aborted as few advertising agencies started charging a lower percentage to undercut competition. The other reason for the ousting of the commission-based model was the influx of new media avenues like radio, out-of-home, digital etc that don't follow the norms set by typical above-the-line media. As a result of this media fragmentation over the years, lots of silos got created and multiple, specialised agencies cropped up. The earlier simple math of calculating media spends got rather complex.
Against this backdrop, we saw agencies moving to the time-cost or retainer remuneration model. The flaw with this model is that while a few international agencies and multinational clients may follow the rules and calculation methods of remuneration as fixed by the retainer model sincerely, the minute Indian clients come to the table, the negotiation process begins and the one who charges the least invariably wins. The advertising industry has failed to check this behaviour and is split on the issue of the remuneration conversation at large.
Everyone is a loser in the process. Without the required funds, agencies can't invest adequately in personnel. If I have an IT company account, I would ideally like to bring on board a resource conversant with the sector. But if I lack the funds I will have to use the existing manpower, possibly not best suited to service the account. In this equation, smaller agencies with limited resources end up charging more whereas larger agencies apply economies of scale and pool together a team, charging lower fees. It is a question of using the existing, unattached to any project manpower.
It is time that the role of creative partners in generating profits gets acknowledged. Agencies and clients can work together to quantify the gains made by the brand numerically, and share a portion of the profits made. We also need some intellectual property rights to protect the advertisers' claim over their work. If a production house creates a piece of work to be used in a certain market or designed for a specific medium, any diversions from this agreement attract additional charges. So, say a production house shot a commercial to be aired on television in India, if it is used in Sri Lanka, over digital, they will charge additionally. Advertising agencies should have similar rights. A shelf life could be defined for the campaign.
As an industry we have moved away from the commission-based remuneration model (where the client paid the agency a percentage of the total media spends on the campaign executed by the creative partners) to a retainer model (where the client pays the agency a pre-decided amount on an annual basis). With the new media landscape and the increasing importance of media agnostic integrated communication ideas, the dice is loaded in favour of the retainer model that drives brand ownership, value creation and collaboration.
With retainers, the conversation around the economics of the exchange are taken off the table at the very beginning. Clients and partners can then proceed to building a successful marriage. There is a sense of ownership on behalf of the agency, a sense of loyalty that comes only with a longstanding relationship.
The retainers work very well in most cases. Except when there is a mismatch of expectations, questions on the agency output and value creation. Value creation and output must be and in most cases, is quantified at the very start of the agreement. Broad parameters are tabulated for the purpose of evaluation at the end of the year, either to discuss bonuses or possibly to serve as a base for the contract to be renewed the following year.
However, as creative output goes, how do you really quantify it? The market is the best judge of the work and if the needle shifts, one can see the impact. Most clients, especially the ones we have on retainers, invest heavily in tracking metrics like ad trackers, brand health trackers etc. They can keep tabs on the efficacy of a particular campaign using these metrics. In my view, a controlled environment is a tried and tested method for research, but at the end of the day it is what it is - controlled! The true test lies in the shelves and in consumers' lives - the difference we have created as market leaders.
Retainers are also becoming important in a fragmented media environment. Every client has on-board several specialised agencies today. For a holistic marketing plan, it is essential that each of these partners collaborate. It is imperative that agencies work together to deliver the best plan to the client. We, at JWT, have held several joint briefings with our clients, with all partner agencies ( media, digital, activation, PR) present in the same room. The advantage is that ideation may be a collective effort but execution is left to the specialised agencies. Such open collaboration is more encouraging on a retainer basis where the partners are not solely concerned about staking claim to ideas and proving itself better. One brand, one agenda - that's how it works the best.
Babita Baruah
Executive business director, JWT (Delhi)
Executive business director, JWT (Delhi)
The variable component will play a large role in remuneration: Sanjay Tripathy
The remuneration structure for creative agencies has evolved quite a bit in the past couple of years. We have gone from compensating based on a percentage of media spends to retainers or even project-based remuneration. This has been a result of many factors playing at both agency and client ends - lower spends in certain industries, the movement of media monies to different, newer avenues and agencies themselves becoming more specialised.
Retainers work best when the quantum of work is fixed. However, the quantum of work alone can't be enough to judge the output from an agency and creative agencies cannot restrict themselves to developing communication but contribute to the larger objectives of the brand. Considering that the sought after talent at the agencies is mostly at the top rung, getting strategic thinking and quality work on various projects is always a challenge. The other side of the story is that sometimes agencies get overloaded with work and multiple iterations in this fixed model.
It is always easier to compensate what you can easily measure, objectively. Media starts with the marketing objective, provides data to back every recommendation and of course the plans are tracked and measured at regular intervals to course-correct and learn for future campaigns. They seem to have a better handle on the return on the investment by the client.
Retainers do not put the onus of improvising and delivering beyond expectations. Like any other corporate situation, you can only get the best out of an individual when you incentivise her. Hence, I see the variable component playing a large role in the agency remuneration, with periodic reviews to ensure expectations match deliveries and course corrections happen along the way.
While creative is highly qualitative in nature, it is important to put some structure to evaluate the output. Some of greatest companies around the world look at creative from one major filter: Is it in line with the brief? Second, is the benefit being communicated in the best possible way? An innovative creative can communicate effectively hence leading for better RoI for the campaign. The other measures are on overall agency performance. The review I mentioned earlier should consist of parameters covering both strategy and execution, and help document expectations and the minimum standard of delivery.
Sanjay Tripathy
Senior EVP and head, marketing, product, digital and e-commerce, HDFC Life
Senior EVP and head, marketing, product, digital and e-commerce, HDFC Life
Shelf life of the campaign should be defined. Usage beyond that must be charged: Manish Bhatt
The classic 15 per cent commission model was aborted as few advertising agencies started charging a lower percentage to undercut competition. The other reason for the ousting of the commission-based model was the influx of new media avenues like radio, out-of-home, digital etc that don't follow the norms set by typical above-the-line media. As a result of this media fragmentation over the years, lots of silos got created and multiple, specialised agencies cropped up. The earlier simple math of calculating media spends got rather complex.
Against this backdrop, we saw agencies moving to the time-cost or retainer remuneration model. The flaw with this model is that while a few international agencies and multinational clients may follow the rules and calculation methods of remuneration as fixed by the retainer model sincerely, the minute Indian clients come to the table, the negotiation process begins and the one who charges the least invariably wins. The advertising industry has failed to check this behaviour and is split on the issue of the remuneration conversation at large.
Everyone is a loser in the process. Without the required funds, agencies can't invest adequately in personnel. If I have an IT company account, I would ideally like to bring on board a resource conversant with the sector. But if I lack the funds I will have to use the existing manpower, possibly not best suited to service the account. In this equation, smaller agencies with limited resources end up charging more whereas larger agencies apply economies of scale and pool together a team, charging lower fees. It is a question of using the existing, unattached to any project manpower.
It is time that the role of creative partners in generating profits gets acknowledged. Agencies and clients can work together to quantify the gains made by the brand numerically, and share a portion of the profits made. We also need some intellectual property rights to protect the advertisers' claim over their work. If a production house creates a piece of work to be used in a certain market or designed for a specific medium, any diversions from this agreement attract additional charges. So, say a production house shot a commercial to be aired on television in India, if it is used in Sri Lanka, over digital, they will charge additionally. Advertising agencies should have similar rights. A shelf life could be defined for the campaign.
Manish Bhatt
founder director, Scarecrow communications
founder director, Scarecrow communications