Opinion: Perspective - The remuneration riddle will not be solved soon

At a recent IPA council meeting, the subject of agency margins came up. One media agency chief admitted that they were finding it hard to get margins up to the 30 per cent mark, at which point creative agency bosses around the table choked on their industrial-strength coffee and wondered where it all went wrong. (One answer: 1989, when the launch of Zenith marked the death of the full-service agency.)

Clearly, the different quarters of the advertising industry are not grappling with quite the same issues when it comes to margins, profits and remuneration. But, as predicted, last week's US ruling on the former Ogilvy & Mather executives Shona Seifert and Thomas Early has thrown another intense spotlight on the issue of agency remuneration.

So, how to get paid a fair whack for the magic that great agencies can conjure? There seems to be a general consensus that timesheets (O&M's downfall) are not the way forward. More and more agencies are negotiating fee payments, topped up by bonuses based on the client's own business performance and pre-agreed criteria against which the effectiveness of the agency's work will be judged.

All of which might well help move advertising on from a commodity service purchased on a crude time/cost ratio, and recognise the impact that great advertising can have on a brand's overall business performance.

But it still fails to address the real issues. As a collection of highly tuned, creative, intelligent people, agencies are well placed to provide long-term money-making ideas for clients that increasingly do not have to have their heart in a simple above-the-line advertising approach. Quite how clients can (be encouraged to) reward this sort of creative intellectual input into their business remains a conundrum.

Of course, it has always been so. Take the old, oft-quoted example of Leo Burnett and its invention of the Jolly Green Giant character. It wasn't an ad, but an entire branding proposition that created a long-term successful business with a global franchise worth millions of dollars. How the hell do you charge for ideas like that? Particularly when it can take years for the value of the idea to become fully apparent (by which time the client has probably buggered off to another drawer-dropping agency with cheaper fees).

This issue of intellectual property - who should own it, how can you charge for it - has long simmered in the background of debates on agency remuneration. Perhaps the fact that it's still unresolved and agencies continue to give away brilliant ideas in return for a fee and a bonus based on this year's sales figures suggests that there is no answer. And anyway, clients are still slow to acknowledge how valuable agencies' ideas can really be to the long-term health of their business.

But until there is a clearer understanding of how valuable this intellectual property really is and how best to pay for it, any debate about agency remuneration remains a relatively hollow one. And the only real winners will continue to be the auditors and consultants who are brought in to marshall the remuneration mire.

As the new marketing director of the BBC, Tim Davie could not have joined the corporation at a more testing time.

Armed with a marketing resource substantially lower than that of his predecessor, Andy Duncan, Davie will have to battle the inevitable negativity that surrounds all things BBC whenever the licence-fee issue is raised.

Today's government White Paper simply serves to raise the marketing stakes for the BBC, for Davie and for his agencies.

Fallon's much-anticipated successor to Perfect Day - though commissioned and created well before Davie's arrival - will be crucial in helping to get his marketing tenure off to a cracking start and answering some of the BBC's critics.

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1 Job description: Digital marketing executive

Digital marketing executives oversee the online marketing strategy for their organisation. They plan and execute digital (including email) marketing campaigns and design, maintain and supply content for the organisation's website(s).