The Pivotal Role of Account Planners in Agency Compensation

July 7, 2010 | Author: Tim Williams

Agency strategic planners are key to outcome-based compensation agreements.

As I've written about many times before, the advertising business stands at the edge of an opportunity to realign the interests of agencies with the interests of marketers by fundamentally redefining the agency-client financial relationship. By moving from a time-based approach to a value-based approach, agencies will be in a vastly better position to provide "excellence" in everything from strategic planning to execution.

Planners are in a pivotal position to make this happen, because increasingly successful agency-client relationships will be defined by the agency's ability to identify, test, and measure brand success drivers. In other words, in order for marketers to pay agencies for value created instead of hours worked, planners will have to work with C-level clients to define the brand's leading indicators of success.

Ask marketers point blank what metrics they care about, and they will almost always give the same answer: sales. But sales is a lagging indicator – an after-the-fact measurement that looks in the rear view mirror. The more important question is what are the factors that predict the success of the brand; the leading indicators of success? In agencies, the planner is best suited to answer this question. Most leading indicators never appear on a financial statement, but they have predictive causation with profitability––that is, they will drive the numbers that ultimately appear on the financial statements. The correct leading indicators will predict the lagging indicators.

Once identified, a brand's leading indicators of success can form the basis of an outcome-based compensation agreement between the agency and the client. By paying their agency for outcomes achieved rather than hours worked, clients are assured the agency's best efforts and best thinking because the agency has all the right incentives. If the client wins, the agency wins, which incents the agency to devote their best talent, apply truly creative strategies, provide unasked-for ideas, and solve problems in unique ways. It redirects the dialogue away from efficiency (concerned with hours and costs) to effectiveness (concerned with achieving results).

Planners are central to making this all happen because they are in the best position to objectively identify the drivers of brand success – the foundation of effective outcome-based agreements.