What is the best Compensation model for you? We will guide you.
Commission System – a percentage of Media costs paid to the agency as their fee.
Retainer System – an (often) arbitrary amount of fee designed to supplement commissions earned or to replace commission income.
Actuals – based upon an agency’s cost of providing actual service plus an agreed amount of profit. Fees can be based on a blended hourly rate, by function, or calculated utilizing actual individual salaries of staff assigned to the business.
Fixed Fee – calculated on a cost plus basis, but guaranteed to the agency regardless of budget cuts that may occur during the year. This is usually in recognition of the fact that the agency has dedicated sufficient resources to deliver a detailed scope-of-work.
Fee Based/Reconciliation – calculated on a cost plus basis, usually paid out in equal installments but periodically reconciled to actual hours incurred.
Tiered/Complexity Model – Client pays more for high-level strategy and creative resources on the most complex programs, while utilizing lower level (less costly) agency resources for less strategic or non-key projects. These can be tiered hourly rates or negotiated fees by level of complexity/importance/lifecycle, etc.
Bonus/Incentive Compensation – Often used as a potential supplement to whatever standard compensation is in place. This is used to incent the agency to perform excellently in areas key to the brand by providing an opportunity to earn a bonus of some percentage of base compensation. Every system is unique to the needs of the advertiser.