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claudiu

jason, you could drop a line to the guys from leo burnett romania. i think they started to charge by the concept. advertising concept/idea.

Mike Flynn

Before coming to Burnett, I was a partner in a boutique experiential shop here in Chicago. When we created the company we tried to build a model based on (what we all seem to see as) the holy grail of getting paid for our ideas.

The basic model was this: Look for smaller CPG companies that could not afford to work with big agencies but recognized great thinking, had significant marketing dollars and a penchant for innovative products. Our pitch was that we would offer them big agency thinking/execution with fees that would cover our costs plus a small margin and they would agree to give us a percentage of sales on the product starting at the launch of the campaign. We quickly ran into a problems.

First, to make this work, you must start with a company that has the finanicial resources to be able to survive until the commissions start to roll in (if ever). As a startup agency, we were not in this position. Second, there are many factors that lead to success beyond communications but are out of your control - most importantly sales/distribution. Both things to consider when thinking about an incentive-based model.

So given my experience, how do big agencies make this leap? I'm sure I'm not the first to think about these but here's some thoughts to add to the dialogue:

One approach could be for big agencies to start divisions/boutiques that act like VCs - looking for smaller companies (or those who are on the ropes financially and have nothing to lose by taking the leap) in which they can "invest" with their expertise. You invest in 20 and if just one pops big, it covers the others plus a respectiable profit. Essentially it's the same model as we attempted but with the resources of a real company. This type of scenario could also address some of the motivation issues you brought up by building in related employee compensation models.

In contrast to this is the ideas-first approach. The model here would be to (without the prompting of a pitch) analyze a category and design strategies/platforms/big ideas/positionings/etc. in advance and then shop them to the various players in the category (presumably starting with the #2 or lower brand). Clients would be given a flat fee price (a very high one) for the concept and execution would be incremental.

Of course, both these models are ripe with potential barriers but they could be jumping off points for experimentation. And, ultimately, I think the path to changing big agency models has to come from an iterative, experimental-type process. We won't solve this the first time around. There must be at least a few high profile wins before the industry is willing to change the way it approaches compensation as a whole. And as we all know, change is hard no matter what how great the reward.

Mike Flynn

As a postscript to my earlier thoughts, the story below from advertisingourselvestodeath.com hints that clients (a big one too) have finally had enough and are taking things into their own hands:

13 June 2006
Put up or shut up, working with General Mills

[by Todd] There's a bracing wind of common sense blowing out of Minneapolis these days and agencies better pay heed.

General Mills has thown down the gauntlet, telling its agencies that they will have control over how a campaign plays out. No more living with a media plan handed down from the client.

But, and here's the hammer, agency compensation will be governed by the results. Do I hear account teams squirming in their seats?

Stuart Elliott broke down the new agreement nicely. (Yes, I ripped on Stuart last week for not writing enough about the changing face of the industry.) He quoted Mark Addicks, chief marketing officer at General Mills, as saying the new arrangements were intended to "completely overhaul the way we work with our agencies."

The goal is "to make sure a campaign, from the get-go, is media neutral, going to the best place for that brand," Mr. Addicks said. Media neutral means that ads run where they belong most, rather than in outlets predetermined by tradition or the size of a commission.

Clearly General Mills has felt the sting of consumers tuning out its message. Campbell Mithun and Saatchi & Saatchi are being dubbed "brand navigators." That means each will coordinate the work of their network partners, while keeping an eye on the big picture. That should lead to some interesting negotiation between the various discipline agencies.

This is an important moment tor an advertising industry that is so worried about being commoditized by purchasing departments. But it sweeps away a safety net of excuses that have protected marginal work for years.

"When we beat plan, the agencies will make more money; when we make plan, the agencies will make a certain amount of money; and when we miss plan, the agencies will make less money," Doug Moore, General Mills vice president for advertising and branding, told The Times.

Something tells me creative reviews will be much tougher now that paychecks rest on each decision.

James Sposto

I posted a similar comment in another place regarding Interactive shops that don't get media commission - I feel is relevant to your discussion.

"We don't get the residual benefit of value from the media buy. What's hard is that time doesn't = value - if I come up with a great idea (in other words, know where to strike the hammer) and that hammer hit only costs $1000 to do - as opposed to an idea that would cost $1,000,000 to execute.) Where is my reward?

I don't want to make it in production (I will anyway) but production should be irrelevant to the concept.

When we are contracted to come up with an idea, that's fine, we charge enough, and know that we will also make money on the production (big or small).

The problem is, when we want to be proactive and present concepts not in response but in anticipation of client needs (or because we're just so damned creative and want to do something COOL before someone else does) we don't get the reward of commission for winning the business.

I want to do the George Clooney model - pay us a big fee just because we are us - and then the concept can be "free" because we will make "scale" for the actual acting.

Damn - WE NEED AGENTS - An agency with an agent, call CAA.

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