2009 ANA Client-Agency Forum

Congratulations to the ANA on a huge turnout to the 2009 Client-Agency Forum held in mid-town New York last month.

Over 300 advertising, marketing, agency and vendor stakeholders were in attendance listening to a wide range of topics covering the client/agency relationship.

The two we took specific note of were the follow-up presentation by Sarah Armstrong of Coke (first presented at the Financial Management Conference) and the discussion about the Agency Performance Evaluation survey. We have covered the key results of this survey in a previous posting so we will restrict our discussion to the Coke Value-based Compensation presentation.

Unit-based Compensation?

Interestingly for me, the Coke compensation model made much more sense the second time around. My impression is that it is a "unit-based" compensation model, rather than a "labor-based" compensation model - with an Incentive bonus layered over the top.

So my understanding is that Coke look to purchase "units" (i.e. deliverables) and those units are assigned a cost. This cost is established by looking at the benchmark range for that unit (using historical data), and then varying the cost based on criteria such as complexity, competition and perceived strategic value. This unit-compensation is designed to cover the base costs of the agency.

The only aspect I do not fully understand is how situations are handled where the units are not well defined, and here I am thinking mainly about the areas such as digital where as an example the construction of a marketing web-site has a wide range of variables.

Scope of Works process

Coke have a very well thought through Scope of Works definition process that supports the purcahse of the "units". From the screen shots provided it seems that the marketers are supported in this process using defined templates, and Sarah's team have developed strong training to give their marketers a deep understanding of what they need to do.

Incentive Compensation (Value-based component)

Then the profit margin is provided using an Incentive bonus calculation.  As with other incentive-based mechanisms it uses the three key data streams; qualitative evaluation scores, business measures and agency measures.

Conclusion

Coke have developed a structured approach to compensation that they say is working well for their marketing team. They address the fundamental issue that ideally agencies should also be compensated for their outputs & outcomes rather than their inputs, only. This shift requires a rigorous approach to Scope of Work management that most companies agree is the basis for a well managed agency relationship.

Author: Richard Benyon (Decideware)