Agency Compensation

Many factors come into play on high value brands. It is difficult to isolate the role of advertising alone.Still, there is a demand to be compensated on the basis of output or performance. It motivates the agency to perform. Pay-for-performance ( PFP ) could work to an extent for new economy companies that need traffic driven to their apps. Even downloads depend on many factors. How to define performance metrics is a moot point. It is possible to go in for PFP where the cause and effect relationship is clearly established. To generate sufficient quantum of remuneration, we can opt for PFP in case of high value brands. Apart from the agency’s execution, what matters are the inputs of the client. In such a relationship, it becomes difficult to convince the client to pay for output. The output is a combined effort. PFP model has one plus point. It does not allow the agency to be complacent. It keeps the creative team on edge. There could be a hybrid model of a fixed component of agency’s pay and a variable amount tied to certain performance metrics.

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