Fewer clients opt for pure labour-based agency contracts

Output-based fees are on the rise.

Fewer clients opt for pure labour-based agency contracts

A survey of 42 big advertisers has found that only a third (36%) use pure labour-based remuneration in their contracts with agencies.

The figure, part of research from the World Federation of Advertisers and The Observatory International, is down from 54% in 2011 and 49% in 2014, the last time the WFA conducted similar research.

The number of respondents currently using output-based fees as the main corporate remuneration contract has risen to 28%, up from 20% in 2011.

Over the next 12 months, 81% of respondents plan to increase the prevalence of output, performance and value-based remuneration models.

"Agencies are vital partners for many advertisers and the way they are paid is a critical step in establishing a productive relationship that delivers real return on investment while also offering agencies the chance to be rewarded for the success they help generate," Laura Forcetti, global marketing sourcing manager at the WFA, said.

"The move to performance-based remuneration is a recognition that, where agencies and advertisers are aligned in the same way, the outputs are more likely to be better for both."

The study, Global Agency Remuneration 2018, also found that perceptions of the value delivered by agencies is very positive, with 87% of respondents feeling that they are getting genuine value for money from their agencies – a big increase from the 67% who said so in 2011.