Pay for performance

Paying agencies for performance is an oft discussed subject.

On the one hand is the agency that says they don’t control the outcome, ie clients don’t buy what they recommend, and the performance in the market is a function of many factors beyond creative.

On the other side is the client who thinks agencies have no stake in the performance of their recommendations.

So you see clients pushing for a model that involves compensating agencies for the performance of their communications. The latest to join the bandwagon is Coke.

P&G started this discussion last year.

I understand the agency predicament..mostly because I work in an agency, and have been subject to vagaries of client moods wrt approval or otherwise of work.

Unlike lawyers and doctors and other deliverers of Professional Service, the overwhelming feeling is that anyone can do advertising and everyone has a point of view on it. So decisions on what to approve or otherwise is left to the senior most person in the room, or the loudest or that ever suspicious thing called research.

I think clients always have a suspicion that agencies are here to pull a fast one over their eyes. And all those rush for awards is not helping matters at all.

I think it is time for agencies to think about ways to judge their performance beyond awards. Something that clients believe in.

Other service firms are judged by success which is objective and measurable. Cases won, successful operations etc.

Agencies typically have two measures. Awards and size. We need something else.

When clients believe that agencies are working to the same goal as themselves this pressure to show loyalty..which is what ‘pay for performance’ in many ways is, will recede.

In the meantime what I urge clients to consider is this

All agencies know that if their strategy does not work a client can walk out the door and there’s nothing that an agency can do about it. So that ensures that everything the agency does is geared towards a client’s success.

So in a sense it is a negative option.

Till agencies think of metrics that clients believe in, this move from clients will gain momentum.

Harish

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