Last week we ran the Performance strand of my ADAPT agenda. In a sense, it's the engine room of the programme. We've covered Alliances, Diversity and Agility.
They built naturally towards Performance, which is about embracing the new payment mechanisms that reward agencies for performance or for taking greater risk. If we’re better aligned with our clients, diversifying our output, and doing more real-time, agile, work, then there’s an unassailable case to be made for being paid differently, and better.
Clearly, we’re not alone in thinking that. The fact that ISBA, the advertiser’s body, was our partner for the event, bears that out.
I’d been looking forward to the day. It didn’t disappoint. We had great speakers, a big turnout – including clients and intermediaries – an engaged audience, and some robust discussion. And it was inspiring to see so many committed, knowledgeable procurement experts contributing.
You can read more details of the day here and about the delegate lab testing of the different models here.
One of the best things was to see the mood change during the day. By the end, I sensed a real appetite for change.
To me, it was because we talked about real examples of agencies getting paid by results (PBR), and participating in risk/reward-based schemes.
We heard about how Engine is exploring the issue across its agencies, not just digital ones. We saw how AKQA has changed its business model and is working with clients on both a value-based and risk/reward-based schemes.
We heard examples from the US – varying from payment per sale in the case of a luxury car brand to royalties per download and play of a game for a healthcare advertiser.
We heard from the government too. Public Health England’s Change 4 Life programme rewards all its roster agencies on the outcomes achieved. That was also interesting because it shows what can be achieved when client, procurement and agencies all work together.
And Martin Riley, global CMO of Pernod Ricard and president of the World Federation of Advertisers, told us how more of his global client members wanted to try different payment models.
These examples suddenly made the audience sit forward. They could see that new payment models are actually out there, in use. By the end of the day, I sensed that both agencies and clients are up for change.
Of course, this isn’t a new subject. But this time round, the climate is different. Clients want both top-line growth and change. They want agencies that are true business partners, they want the interests of both parties aligned, and digitisation changes both the way we work together and the way outcomes can be measured.
I’m not expecting an overnight revolution. I expect most contracts still to be time-based. But as one of the labs showed, we can do time-based payment a lot better.
To me therefore, the Coca-Cola 70:20:10 model is a good way to think about it, and a good target for agencies and clients to aim for. One of lessons from the day was the importance of taking a portfolio approach to payment models.
The whole point about PBR or risk/reward models is that they should hurt if they don’t work, but at the same time there has to be a genuine upside, so that outstanding outcomes or successful innovation by the agency – and risk/reward models are especially appropriate in encouraging either tech- or IP-led innovation – are properly rewarded.
Long and strong relationships
It was also encouraging to see that clients understand the value of strong, long-term, relationships with their agencies. These bind both sides closer together, foster shared agendas, and generate better work.
A number of clients said on the day that they wanted their agencies to be real business partners, and that long-term relationships – with contracts at a minimum three years’ length – would foster stronger bonds.
This backs up what we heard from Peter Field, co-author of The Long and Short of It about the long-term power of brand building, and how it adds real value to clients. His perspective on measurement and longevity is significant in this context because it is critical to the new payment models. They work best when both sides can take a longer view.
It’s vital now that we keep the momentum going. Debbie Klein, CEO of Engine, described the day as a "collective war-cry" for change.
Now it’s over to agencies and clients – and the intermediaries, who play a key role – to take up the challenge.
For our part, at the IPA, we’ve worked together with the ISBA to publish a draft charter that gives everyone a framework to build on. You can read it here. Over the next 100 days, tell us what you think, and what we can do to improve it.
After that, the charter will be part of a revised and updated version of our best-practice remuneration guide. Again, we’ll we working with ISBA on this.
We’ll also be working with Martin Riley and the World Federation of Advertisers. They represent 70 of the biggest multinational advertisers – names like ABInBev, Adidas, Mars, P&G and Red Bull – as well as national advertiser associations.
And that’s why I know the timing on this initiative is right, and the momentum is there.
Get involved on Twitter with the hashtag #ipadapt
Visiting the IPA’s ADAPT hub where news from the events as well as the findings, photos and videos from this Adapt strand will be posted.