Spotlight on: Working practices - Innovative remuneration for e-commerce is the way to go. Old-style agencies need to take a fresh look at doing deals, Alasdair Reid says

How much pressure does the new economy exert on the working practices of the marketing services business? Creative departments in large agencies, for instance, have been driven to distraction over the past year or so by dotcoms telling them they have to deliver work ’at internet speed’.

How much pressure does the new economy exert on the working

practices of the marketing services business? Creative departments in

large agencies, for instance, have been driven to distraction over the

past year or so by dotcoms telling them they have to deliver work ’at

internet speed’.



It’s only in the past couple of months that creatives have found the

courage to argue their corner somewhat more forcefully.



But in other areas, the pressures on agencies may not be so easily

resisted.



Take, for instance, the whole question of remuneration and the

increasingly widespread practice, in certain areas of the e-commerce

world, for service companies to take payment in the form of an equity

stake or some kind of profit-sharing agreement.



One recent example of this was Blueberry.net’s recent deal with Laura

Ashley. Blueberry will manage all aspects of the retailer’s migration

into e-commerce - everything from website design and functionality to

overseeing a programme to ensure that it all dovetails with existing

retail activities. Blueberry has taken on the work under its Pay For

Performance Partnership Programme.



Piers Hogarth Scott, Blueberry’s chief executive, says it’s the ultimate

win-win arrangement: ’We have partnership relationships with most of our

clients. We see ourselves as part of their organisations and vice

versa.



We share their risk and we share their success. We’ll defer some of the

costs in return for an interest, whether that’s in the form of a

percentage of revenues or margins or profits or, increasingly, an equity

stake. This is the ultimate in performance-related remuneration. It

creates a fruitful relationship with clients and ensures that everyone

goes just that little bit further.’



It’s well known that many advertisers - and not just dotcoms - have been

talking to a wide range of marketing services companies about innovative

remuneration methods. Agencies have not exactly been excited about the

idea - even though we’ve seen many broadcasters indulging in airtime for

equity deals.



Advertising, they argue, is different. And Blueberry is, after all,

merely a design agency, isn’t it? It’s a different proposition. Well,

maybe.



The problem is that the new economy blurs all sorts of lines. Blueberry

advises clients not just on how an online brand extension works but also

on what implications that has for the parent brand. It does all sorts of

stuff that a through-the-line agency would do, including offering advice

on what sort of ad strategies a dotcom should pursue.



Hogarth Scott argues that the advertising community should take

note.



’Above-the-line agencies don’t have a great track record when it comes

to e-commerce but if I were them I’d look at doing performance deals.

I’d expect to see it from agencies more closely aligned to the

business.’



Such as, for instance, i-level? Charlie Dobres, i-level’s chief

executive, is open-minded but points out that performance-based pay can

be a headache for clients too: ’Often the client opts for the basic and

most easily executable practice of fees set against time. Profits share

models are hard to track.’



It’s a common response. Benchmarking in this area isn’t easy, but there

are those who suspect that agency caution is symptomatic of something

else entirely. Marketing services companies, they argue, have not been a

traditional home for reckless risk junkies.



Some agency principals will argue that this is all very unfair and will

point out that the industry has come a long way in the past ten

years.



It has moved from the good old 15 per cent commission days of the

full-service agency to fee schemes. Some have even flirted with limited

forms of payment by results. But it has been no more than flirting -

we’ve yet to see the equivalent of the ’no win no fee’ proposals offered

by ambulance-chasing lawyers.



Jason Goodman, the joint managing director of BMP Interaction, believes

profit partnerships were rarely entertained in the past. ’With the

downturn in tech stocks it has become more talk than reality,’ he

adds.



This is surely a field of very long odds runners. Hogarth Scott

disagrees.



Risk, what risk? ’Over the long term the risk is minimal as long as you

weed out the obvious doubtful cases from the real players. Our way of

doing it is to go with established retailers who know what they are

doing but are now looking to evolve a multichannel retail strategy. I

have no doubts about the future of this industry. Agencies shouldn’t

either.’



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