In today’s fast-moving world of media agencies, a critical question is forever looming large: Is it time for these agencies to begin reassessing their remuneration strategies? Complex connections between media agencies, advertisers, publishers, and tech platforms have generated genuine concerns. Among these concerns are rewards and payments and practices, which have on occasion led to trust issues and the increasingly complicated world of the internet. Looking at this ever-changing situation, the idea of Deliverable-Based Scoping (DBS) is seen by many as something that could have a hugely positive influence. It could change how media agencies get paid by adjusting how things get done.
A Brief History of the Evolution of Media Agency Compensation.
A historical perspective reveals the often-complex evolution of media agency compensation.
“If agencies are to avoid longer-term pricing challenges, experimentation in new models of remuneration and agency structure should be investigated” Tim Bradshaw, Financial Times
In the 1970s, the expansion of media channels outside traditional outlets like television, radio, and print grew exponentially. The decade saw considerable growth in satellite communications, cable television, and emerging digital technologies. This expansion laid the groundwork for the enormous, diverse media landscape that would begin to take over. Agencies could now negotiate compensation for managing campaigns across various platforms.
During the decade, agencies forged a symbiotic relationship with media owners. This partnership secured a steadfast 15% discount in exchange for committed spending. In the ensuing decade, we witnessed the inflation of media costs, resulting in an upswing in agency investment returns. Often shrouded in secrecy, the veil was eventually removed, revealing the size of agency margins. Therefore, as the public learned more, the commission model and the demarcation between creative and media functions sparked inquiries.
The evolution of media agency compensation in the 1980s developed rapidly. The fast-moving changes in technology guided it, the way people consumed media and client expectations. The move to digital media, increased competition, and an increased demand for transparency all helped shape how media agencies would structure their compensation approach throughout the decade.
The 1980s marked a turning point as agencies redefined their role as full business partners. However, confusion in the media regarding inflation and burgeoning profits saw an industry-wide introspection. The commission model was scrutinized like never before. The separation of creatives and media agencies became blurred. Thus began a reassessment of the agencies’ compensation structures.
In the 1990s, there was a seismic shift as agency acquisitions surged. This paved the way for holding companies to create their own media agencies. As the new millennium dawned, it saw intensified scrutiny of agency pricing, thus prompting a considerable shift from commissions to fee-based structures. Volume-based rebates, once the foundation of compensation payments, were replaced with, sometimes intricate, agreements with media owners.
The age of headline commissions dwindled as rates plummeted as low as an unbelievable low of 1.5%. As the financial landscape changed, it triggered concerns regarding the neutrality of media. Many people questioned why certain agencies favored certain media outlets.
The growing prominence of digital media, increased reliance on data analytics, and the need for transparency and return on investment measurement all played essential roles in shaping the future.
Things evolved significantly as the new millennium got underway. Changes in media consumption, technology, and industry trends saw significant developments in media agency compensation.
In 2016 the K2 ANA (Association of National Advertisers) report was released. It shed light on some unusual and unorthodox agency revenue practices. The findings damaged trust between agencies and clients and highlighted the need for an urgent overhaul. Media agencies grappled with the problems of rebuilding trust. A new multifaceted approach was required; enter Deliverable-Based Scoping.
The Rise of Deliverable-Based Scoping
Deliverable-based scoping is designed to be a beacon of transparency and accountability. Deliverable-based scoping defines what tasks will be done, and what the outcome success of the output is. All this is considered together with the people involved and the time it takes. Only then can you arrive at an accurate price. This innovative framework prides itself on well-defined services that encompass parameters, margins, and prices. It enables agencies to get to the heart of each project. Its great strength lies in its meticulous planning. Agencies can meticulously plan and document every facet of a project before even engaging with the client. Unlike the old, antiquated templates, DBS signals an age of precision planning. Like never before, agencies can ensure that every aspect of the scope is clear.
DBS Kills Scope Creep
A fundamental part of DBS is its capacity to limit the perils of scope creep. Agencies can structure scopes over an extended period, subjecting them to all necessary contractual adjustments. This, therefore, curtails the risk of losing direction. Agency teams can easily safeguard against unexpected deviations. At the same time, it empowers their clients to understand the implications of scope modifications and, with them, their service obligations. This clarity engenders a feeling of mutual trust and understanding. Objections are no longer in conflict.
DBS is more than simply about the money. At its core is its ability to build trustworthiness in its partnerships. It enables agencies to showcase their capabilities as reliable stewards of their client’s visions. Technological solutions become crucial conduits of seamless data integration. This allows agencies to see beyond superficial aspects of the job and make informed strategic decisions. Client trust is elevated to new levels. Performance-based compensation structures underscore a firm commitment to outcomes. Client goals are realized; everyone is happy.
In the grand scheme of evolving media agency compensation, DBS is a crucial part that pulls together accountability, transparency, and adaptability. It has begun the journey towards a future where remuneration is not just a transactional exchange but rather a reflection of shared objectives and collaboration.
The future is constantly changing the digital landscape, with media agencies standing at the heart of its transformation.
It is time for media agencies to reassess their compensation model, and if so what is the answer? Could it be deliverable-based scoping, and might it help them not only with transformation & trust but also enable an unstoppable commitment to client success…only time will tell!