Agency Income Survey

Willott Kingston Smith has published a survey on the make-up of the gross income of ad agencies, with particular reference to performance related revenue.

The survey found that despite recent debate on the merits of agencies being remunerated on a performance-related basis, less than 0.7% of agencies’ gross income is currently calculated by this method.

In a previous survey carried out in May for Marketing Week and Richmond Events it was shown that 14% of advertisers favoured payment by results, another 14% were happy with commission, and 26%favoured fees; the remaining 46% favoured a combination of all three methods. This implies that clients would like a performance-related element built in to payment.

Production mark-ups are an important source of agency income; one in six agencies rely on mark-ups for 25% of their income. These seem likely to continue as a vital element of agency remuneration, particularly if the pressure is maintained on fees and media commission.

The survey concludes that viable alternatives to traditional payment methods have so far not been found, and that for new methods to be successful, they must be profitable for agencies, and clients must be confident with them otherwise marketing budgets will be deployed in other parts of the services sector.

The survey was carried out in June-July among 72 agencies, 39% of which replied.

COMPOSITION OF GROSS INCOME

WILLOTT KINGSTON SMITH 071 580 4646