Of those marketers using performance incentives, the survey showed a 15% increase since 2010 in the use of a “risk-reward” financial component. The risk-reward approach involves reducing the agency’s basic fee when goals are not met, while raising the compensation when performance goals are met or exceeded.
In addition, compared to 2010, cutting costs has greatly declined as a reason for changing compensation methods. Nearly 40% of the respondents said the main reason for changing their compensation method in 2013 was to improve agency performance. Cost-cutting on the other hand, saw a 13% decline between 2013 and 2010 when the impact of the recent recession was still fresh.
Other findings from the survey include the following:
Three out of four advertisers measure performance incentives by agency performance reviews; 71% by brand awareness; and 52% by sales goals.
More than half of the respondents (56%) continue to structure their agency incentive as a pure upside bonus on top of the negotiated “base” compensation.
One-quarter of the marketers indicated that they were very satisfied with their current agency compensation method, while about 60% were somewhat satisfied.
The use of a procurement/sourcing/purchasing team jumped from 56% in 2010 to 82% for 2013.