ISBA Study Reveals Shift Towards Payment By Results
The advertising downturn has caused a major shift in the way media agencies are paid, according to the latest research from the Incorporated Society Of British Advertisers.
The third phase of the Paying For Advertising study, released this week, shows that almost half of all agencies now incorporate some form of payment by results (PBR) system.
A total of 46% of media agreements currently contain some aspect of PBR, compared to just 36% in 2000. In addition, around 40% of advertiser-creative deals are based on a performance related policy.
The influence of procurement specialists is also growing, with the proportion of advertisers involving their purchasing department in the negotiation of agreement having reached 48%, compared to just 33% in 1997.
The report reveals a demise in the role of the full service agency and the continuing trend of separating planning and buying, with just 6% of agreements now running through combined agencies, down from 14% in 2000 and 33% in 1997. Meanwhile, the share of media accounts taken by independents has risen to 77%, compared to 68% in 2000 and 45% in 1997.
There has been no significant increase in levels of advertiser satisfaction with agency transparency since the first report was published six years ago. The latest phase of research reveals that 34% of respondents expressed satisfaction with the transparency of their agency, compared to 32% in 2000 and 33% in 1997.
Jonathan Lace, author of the report, said: “Advertisers continue to search for value from their agencies. Nowadays that’s as much a matter of specialist procurement, choosing where to resource service and the design of remuneration agreement as it is of negotiating the headline commission or fee rate.”
Debbie Morrison, ISBA’s director of membership services, added: “The data in this report is invaluable in providing the benchmarks advertisers need to compare their own remuneration models.”
Charlie Makin, chief operating officer at BLM Group, recently claimed that return on investment is a “complex area” for media agencies to get involved in. He warned that isolating the effect of media investment from a communication strategy is not straightforward and called on agencies to be cautious before grabbing ROI merely as a piece of positioning (see NewsLine Column: ROI: Another Buzzword Bandwagon?).
ISBA: 020 7499 7502 www.isba.org.uk
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