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Zero-Based Agency Profits

No one hires an agency to keep the status quo. Agencies are hired to improve market share, increase sales, raise awareness, launch brands, or reach another specified goal.

Accountability Pricing™ starts with defining measurable and fair brand objectives each year and then rewarding the agency with meaningful profits when each of those objectives is achieved. Agencies should not be rewarded with profits if objectives are not met.

Whether we are hired to conduct an agency review or optimize a current agency relationship, establishes a new compensation model grounded in zero-based agency profits and multi-leveled performance incentives.

This system depends on a detailed Scope of Work (SOW), well-defined metrics for success, and a clear understanding of what resources the agency needs to successfully complete each task. This information is used to create a customized zero-profit rate card, which is used to pay the agency for output based on the assignments listed in the SOW document, plus a fair overhead rate. This system ensures the client will have a fully engaged agency focused on increasing brand value.

Strong Incentive Agency Compensation

Incentives are a funny thing. If they are fair and quantifiable, they can stimulate and reward. If they are unfair, or worse, immeasurable, they can discourage and disappoint.

Although agency incentive programs have been around a long time, they aren’t often fair and quantifiable. Some agencies are only willing to risk a portion of their profits, so they still make money even if their ideas do not work. On the other side of the table, clients can be unclear about brand objectives, the metrics they use for evaluation, and the SOW necessary to achieve desired results. For the partnership to flourish, clients and agencies need to establish a working relationship based on increasing brand value and attaining mutual goals.

At , strong incentive compensation stemming from zero-based profits is at the core of our services. By strong incentives, we mean the agency can earn a profit of up to 40% if they significantly exceed performance goals. Why? Because the success of the agency’s efforts should easily pay for that high percentage or level of profits thereby paying for itself.

The client and the agency independently contribute to a brand's success. So when an agency meets or exceeds determined targets, the client should reward the agency with a bonus. If the agency doesn't meet or exceed targets, they shouldn't get rewarded with profits because they didn’t get the job done.

This compensation system only works when the client and the agency are accountable for their actions. This is why ensures that the SOW and performance metrics are clearly spelled out and agreed upon by both the agency and client at the beginning of the relationship and reestablished on a yearly basis.

Compensation Based on Output

In the past, agency compensation was determined by how much money a client spent on media. Then clients decided to start paying their agencies based on man-hours. Neither method took into account how many hours it took to accomplish the task, how well the agency performed or how much actual output was required from the agency. Both these methods are inefficient and unacceptable—in fact they reward the agency for inefficient behavior because more hours to do a task allows the agency to charge the client more. Fortunately, has a solution.

collectively has over 100 years of experience and understanding of what goes into each type of creative assignment. With this understanding we allocate a monetary value for creative and production services based on the complexity of an assignment, the necessary number of creative rounds, and the anticipated amount of rework. Next we work with the client and agency pair to determine the level of account management and planning required to complete the client’s SOW. As always with , the SOW must be clearly defined and mutually agreed upon by both the client and the agency. Then a fair overhead rate is determined and factored in (we have these overhead rates). This customized zero-based rate card gives clients and agencies up-front knowledge of the total cost for each planned assignment. This rate card is an important tool for determining how much clients pay their agencies.

We all know SOW changes throughout the year, but with the rate card and a regularly updated SOW document, agency fees can change as well, increasing or decreasing based on the actual amount of work performed.

This systematic process of determining compensation based on output eliminates wasteful spending on canceled or simplified assignments and keeps the team's attention appropriately focused.

Detailed and Monitored Scope of Work

Scope of Work defines everything. It is more than a simple project list. It is a clear delineation of what advertising needs to be done in order to achieve particular brand objectives.

provides clients and agencies with the process and steps needed to determine their SOW. A detailed SOW document should include each assignment, its level of complexity, the number of creative rounds required, and the expected amount of rework. To help create this document, works with both the client and agency(s) to clearly outline and determine what is needed and expected. To track changes to each assignment, also provides a simple tracking form which is completed by the agency and reviewed monthly with the client. This tracking form makes the client-agency relationship transparent, reveals inefficiencies, and ultimately reduces costs as well as the likelihood of miscommunications.

All members of both teams should play a role in determining SOW because the client’s success and the agency's profits depend on it. This means both the client and the agency must have a strong voice in defining what work each believes is necessary to reach the specified performance targets.

Finding and Validating the Best Strategic and Creative Talent

Scope of Work systems, proprietary data, and compensation programs are worthless if the best strategic and creative talent is not matched properly with the client.

As the saying goes, “a client gets the agency it deserves.” At , we make sure clients understand what type of agencies they are hiring or currently have on their rosters.

Agencies provide a valuable service that can make a significant difference in a brand's development. No other industry can offer what agencies do for clients. helps by articulating not only the SOW that is needed, but also the type of people and agency the client needs to succeed in the marketplace. Understanding an agency's creative talent does not simply mean reviewing its creative department. It means reviewing the agency's working relationship between its many departments, with other agency groups and with the client.

The best-suited agency creative processes for a client are identified through a series of in-depth interviews conducts with clients and agencies in Phases I and II of the Accountability Agency Review. Then a handful of probable good-match agencies are selected to replicate their creative processes during real-world work sessions with the client.