As digital takes a greater role in marketing campaigns, client demands on agencies are growing. Natalie Gross, CEO at Amaze, takes a look at the changing relationships between clients and agencies, and why performance-related pay is likely to become to preferred payment model in the future.
As the shortage of skills in the industry increases, we’re going to see the commercial relationships agencies have with their clients change dramatically. The exponential growth in salary costs, continued squeeze on rates and consistent expectations from clients for more bang for their buck means we’re going to see more performance-based rewards coming into play. Digital is now a serious business and the stakes are high, so campaign KPIs that are infinitely more measureable than the design and build side of things will become central to client/agency relationships.
Subsequently, we will see two different types of models and relationships emerge. Firstly, performance based on how well a digital property that is part of a business’ infrastructure delivers against stated business goals. Clients are investing large amounts of money in analytics, insights, UX, brand etc, based on their own in-house teams but also on the expertise and recommendations they are receiving from their agencies.
This clearly calls into question how accountable an agency should be and how they should be remunerated, to include an element of risk associated with targeted improvements that are set out at the beginning of any project. This calls into question the client/agency relationship, the way projects are commissioned, the ongoing relationship and accountability for how well a solution performs once it’s in the business. This new model will shift ownership and I’m looking forward to seeing how this develops in the coming year.
The next area is about how true business innovation is rewarded. We are seeing immense opportunities for new business models afforded by emerging platforms and technologies, that are changing the way companies do business, and in some cases the business they’re in. The recent developments in the publishing sector that are set to continue with the likes of iBook, see the opportunity for emerging companies to innovate and gain a position in industries that previously had high barriers to entry. In that scenario, where agencies take on a level of risk – working with start ups, using new technologies to truly move a brand/business forward, vanity projects that trail blaze sexy new technology for clients – the payment models are not as clear as simply paying for time. Co-developed IP and business innovation needs to be rewarded in an entirely different way.
We’re actively talking to a number of our clients where our ideas, and the risk of first mover advantage we create by using new technologies first, are remunerated with not just performance based reward but a % of revenue generated from the new ideas we effectively “co-own”.
As well as commercial model changes between client and agency, we are likely to begin to see a change in the value exchange model between agency and employees, with individuals increasingly accepting part ownership/risk/reward as part of their package.
BY Natalie Gross
CEO
Amaze
www.amaze.com
