Neil Muffitt believes the creative work of agencies deserves to be
better rewarded, and that clients should understand the need for changes
to the payment system
There was a time when many clients didn’t worry about how much their
agency made, but I can’t remember that far back.
Nowadays, it’s commonplace to discuss remuneration alongside the
creative rationale as a further justification for the client to give its
business to the agency.
This is a terrible state of affairs for two reasons. First, a client’s
decision to choose agency A over agency B should not be based on price.
A client isn’t buying a pallet of sugar, and marketing services can’t
realistically be considered commodities.
Second, as soon as remuneration goes on the agenda, the client
automatically thinks the agency is paid too much. I can’t recall a
client saying: ‘Oh, is that all you get out of it?’
Perhaps agencies have only themselves to blame. If a client raises his
or her eyebrows on your suggestion that he gets a 2.5 per cent
commission rebate, stick to your guns. Don’t cave in and offer a bigger
rebate. Convince him on the quality of your thinking and creativity.
The above scenario is very frustrating, but there is another which is
even more so. Why are agencies so keen to give away their core product?
In other words, why do they charge a standard media commission and mark-
up on bought-in costs, and then throw in free creative, planning and
That beloved media commission subsidy makes it impossible to measure
whether any part of our service is value for money to the client.
I would much rather we charged the going rate for the creative,
imaginative business advice part of our expertise and charged a much
smaller amount for the mechanical side of the job. After all, you
wouldn’t expect a lawyer to mark up your stamp duty and throw in his
legal advice for nothing.
One way of trying to change the established rules is to involve the
client’s finance director at the stage where you talk money. Most will
be experienced buyers of professional services - legal, banking, audit
and insurance - as a matter of course.
Any finance director worth his salt will recognise value for money and
won’t just buy on price alone. But if you don’t involve him in the
choice of agency it may be hard for him to see the benefits and he will,
instead, concentrate on the costs. It’s no wonder if he then pushes the
marketing director to try for a further 2.5 per cent back on the deal.
There has been much talk over the past ten years of radical changes in
the way agencies earn their money, but in practice not a great deal has
Payment by results is still a difficult concept because nobody has yet
come up with a formula, acceptable to both client and agency, that can
genuinely isolate the effectiveness of a campaign.
Of course, the main barrier to this is that it represents a change and
is, therefore, outside some individuals’ comfort zones. After all, any
change in the method of remuneration will make comparison with the past
It’s a shame that, after successfully pitching for a piece of business,
the agency often can’t persuade the client to alter how it will pay for
Commission and fees still prevail but the system is fundamentally
flawed.Traditionally, the more successful an agency is in negotiating
lower rates, the less it earns. What chance of negotiating a deal with
the finance director (who may not be tied to historical thinking on
remuneration) for you to earn a commission on the amount saved rather
than the amount spent?
Now that would be a first - both client and agency benefiting from a
Neil Muffitt is finance director of advertising principles