Compensation Models Morph To Fit The Times

George Tannenbaum knows what’s wrong with advertising today: “There is no longer any incentive to produce anything.”

Dave Trott agrees. “Under a commission system, the incentive is to make advertising and run it. Under a fee system, the incentive is to string out the process to justify the fee.”

Of course, these ad industry vets are revisiting the days when agencies made money by marking up a client’s media buy by 15% or more.

Here’s some more from Trott on the loss:

Now as soon as the advertising runs we stop making money.
Because we stop billing hours to the client.
Now we make our money on hours spent having meetings, doing research, debriefing research, travelling to meetings, having pre-meetings, all of it chargeable.

…It’s like judging an artist, not by the quality of the pictures they paint, but by how much paint they use.

The efficiency of the old model is attractive, but I’m confused. How did the old timers bill for direct mail, event marketing, PR and the like without a fee system in place? So much of what we do today, we do with no media buy in the plan. For instance, I just spent close to one year working on the launch of a client’s new web site. A job like that clearly does not fit into a “mark up the media” structure, because there is no media. A client web site is the media. What are you going to do, mark up the annual domain lease and hosting? Sure, we can do that. Now, we’ve made a couple hundred dollars.

As for the incentive to produce things, I know what Tannenbaum means, from a strictly business perspective, but that math doesn’t account for the myriad people who work in advertising precisely because they love to make things. It’s in their blood, and through years of practice, they’ve become quite adept at the practice. Fee-based billing doesn’t slow these creators down. In fact, nothing moves these true zealots from their mission.

I was recently asked by a client to justify my monthly retainer. It wasn’t personal. It was business. And I don’t mind doing it because when I’m on retainer, I’m always available and always thinking on the client’s behalf.

Let’s rethink this whole discussion from the client’s side of the fence…does a client want an agency who is motivated to run ads–as many as possible, for as far as the eye can see? Or does the client want an agency with an open mind and a dedication to solving the brand’s marketing problems, whatever they may be?

About David Burn

Fired up to write it down. Co-founder and editor of AdPulp. Chief storyteller at Bonehook, a guide service and bait shop for brands.