Brands rethink how agencies are paid, report

For the first time, the research also examines agency relationships beyond remuneration, covering the commercial cycle from briefing and scoping through ways of working, performance, value, remuneration and payment.

Global brands are moving away from traditional labour-based agency remuneration, with the model now accounting for 19 percent of arrangements compared with 54 percent in 2011, according to a report from the World Federation of Advertisers (WFA) and Agency Mania Solutions.

The report, How Brands Define, Scope and Reward Agency Work, finds that fixed-fee and output-based models have increased from 20 percent to 33 percent over the same period. Labour-plus-performance models have also more than doubled, rising from 9 percent to 21 percent.

Performance-based models gain momentum

Looking ahead, 63 percent of respondents expect to increase their use of performance-based fees. Value-based models follow at 46 percent, while 36 percent anticipate greater use of fixed-fee or output-based approaches.

By contrast, 42 percent expect to reduce their use of labour-plus-performance arrangements. Commission-based models are also expected to see more contraction than growth.

The findings suggest AI could accelerate the shift because agencies can complete more work in less time. However, only 20 percent of respondents say they have already evolved their commercial models in response to AI, while 61 percent intend to do so.

Brands place greater emphasis on agency value

Laura Forcetti, Director of Global Marketing, Sourcing and Director Marketing Services, Asia Pacific at WFA: “Clients ultimately care about the quality, impact and performance of the work – not how many people or hours were required to produce it. AI is accelerating this transition by enabling agencies to complete many activities faster, making time an increasingly weak proxy for value. The growth of hybrid approaches also shows that no single model suits every discipline or assignment. The future of agency compensation is not paying for effort, it is rewarding valuable work, delivered effectively.”

The study is based on responses from 69 multinational companies across six industry sectors, representing a combined global marketing spend of $147 billion. Global marketing procurement professionals accounted for 71 percent of respondents.

Briefing and trust influence agency performance

The research identifies great briefing as the strongest contributor to agency performance, scoring 5.6 out of six. Respect and trust followed at 5.2, while high-quality feedback scored 5.1.

Financial incentives scored 3.9 out of six, placing them behind briefing, trust and feedback as contributors to agency performance.

Agency relationships have also become longer since 2018 across creative, production, media and paid social. Paid social recorded the largest increase in average tenure, rising from two years to 4.3 years.

Agency relationships face greater complexity

Bruno Gralpois, Co-Founder & Principal, Agency Mania Solutions: “Becoming better partners isn't a mindset shift, it's an operational one. As AI reshapes how work gets done and priced, the brands and agencies who get ahead will be the ones building the clarity, shared definitions, and ongoing conversations that let trust and commercial models reinforce each other, instead of compensating for each other. That's the harder, more durable work than any single remuneration formula.”

Performance-based remuneration remains limited despite expectations of future growth. Between 67 percent and 80 percent of respondents say performance-based remuneration currently accounts for less than 20 percent of total agency compensation across most disciplines.

Adoption is highest in media-related disciplines, where outcomes can generally be tracked and measured more directly than in creative and production work.

Payment models vary by agency discipline and region

Fixed-fee or output-based compensation accounts for 58 percent of creative ad-hoc work and 61 percent of production arrangements. Media has a more varied mix, with labour-plus-performance models accounting for 41 percent of media planning, 34 percent of media buying and 30 percent of paid social arrangements.

Regional differences are also evident. In the US and Canada, labour or FTE models remain the most common approach at 38 percent, followed by fixed-fee or output-based models at 29 percent and labour-plus-performance at 21 percent.

Europe has a more diversified mix, with fixed-fee or output-based compensation leading at 32 percent. Asia Pacific has the strongest orientation towards fixed-fee or output-based models, at 44 percent.

Global agency contracts continue to expand

Global contracts are used by 67 percent of respondents for media planning and 61 percent for media buying. They are less prevalent for integrated creative and Creative AOR relationships, where adoption ranges from 49 percent to 52 percent.

Creative ad-hoc work remains more locally managed, with 50 percent handled through individual national contracts. Production uses a more balanced combination of global, regional and local arrangements.

Managing agency relationships is also becoming more difficult. Some 35 percent of respondents report increased difficulty, compared with 12 percent who say relationship management has become easier.

The report attributes the more challenging environment to factors including additional stakeholders, more complex scopes, shorter timelines and greater expectations around data, technology, integration and transparency.

Agency value remains high despite transparency gap

Media rebates remain largely separate from agency remuneration. Some 63 percent of brands, up from 60 percent in 2022, do not adjust media agency remuneration against volume rebates.

Among brands that do make adjustments, 25 percent report that rebates offset less than 10 percent of agency fees, while 7 percent report an adjustment of between 10 percent and 30 percent.

The research also finds a gap between perceived value and cost transparency. While 89 percent of brands believe they receive value for money from their agencies, only 48 percent say they have sufficient transparency into agency costing and profitability.

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