Initial results from a survey conducted by Ernst & Young Management Consultants for the Association of Canadian Advertisers (aca) indicate the 15% commission system is dead and that clients want to talk about fee-based performance systems.

The Advertising Agency Remuneration Survey says that nearly 70% of respondents chose to report on fee-based remuneration systems rather than commission-based systems, and further, the results indicate that the majority of respondents’ remuneration for production services is no longer through commissions but rather through fees.

Some 80% of respondents have a written agreement in place but only 20% have the same agreement with all their agencies.

The full study also drew answers on specialized media services, the role and contribution of bonus and incentive payments, prospective changes to remuneration, and client satisfaction.

Ron Lund, president and ceo of the Association of Canadian Advertisers, says he was encouraged by the study’s findings because it provides information that can help push the agency/client relationship forward.

He says the move to fee-based remuneration isn’t a bad thing because so much of the work agencies are doing today is not traditional advertising.

‘Commission structures deal with the old way of doing business. If you don’t have a way to remunerate and reward your creative or media agency for looking outside the box because [such thinking] doesn’t fit into a traditional percentage commission mold, then there’s no reason for people to look outside the box.

‘The remuneration and rewarding of that has to mirror the way you want your agency to perform.’

Interestingly, in the section on bonus and incentive payments, clients were not interested in whether the advertising won awards, but rather placed importance on hitting business objectives first.

One area where Lund says there is room for improvement and a chance for agencies and clients to work together is in the relationship between agency agreements, agency evaluations and the remuneration package.

While 80% of respondents had a written agreement in place, he says they are primarily functional, contractual agreements.

The numbers went down when clients were asked whether they had a formal evaluation process, and dropped to less than one-third when asked whether that evaluation was embedded in the written agreement. As to whether performance level of the agency affected remuneration, very few clients said that it did.

On the positive side was the response to the question: ‘ To what extent do you require durable franchise-building campaigns, or one-off activities?’

Lund says well over 80% of respondents truly want their agencies to engage in franchise-building activities, versus one-off activities.

‘The good news is they really do see agencies as the people who can help them build their businesses.’

Lund says the agency/client relationship will be explored even further with a second study to be completed within the next 12 months.

The Advertising Agency Remuneration Survey will be conducted on a triennial basis with the next one coinciding more closely with the one done by the Association of National Advertisers in the u.s.

The u.s. agency compensation study, released this past June, also indicated the demise of 15% commission system, with more than 50% of its respondents saying they used a labor-based compensation program for their agencies.

Ernst & Young sent out more than 400 questionnaires to major Canadian advertisers, 100 of which were members of the aca.

There were 101 responses with 53% of those from aca members and 47% from non-members.

Roger Kenrick, a principal within the Strategic Services & Customer Connections Practice at Ernst & Young, managed the study and will be presenting the top-line results Oct. 27, immediately prior to the ACA Gold Medal Award luncheon in Toronto.