A Simple Answer to Agency Compensation Questions

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By:  Beth Vendice, President, Mercury Media Boston

We like the debate that has arisen lately around agency compensation. The debate comes and goes every now and then but seems to be more of a springtime phenomenon. After all, that’s when a lot of TV budgets are evaluated and allocated.

The possibilities for agency-based compensation are always intriguing. There’s the debate over project-based compensation, annual compensation for an agency of record, or straight commission from dollars spent. A recent article in AdAge by Chris Kuenne, CEO of Rosetta supported value-based compensation which takes into account that agencies should be accountable for at least some of their performance. “Call it what you will — value-based compensation, pay for performance or incentive-based compensation — by now we all get the premise: Agencies are compensated above their basic costs if they achieve or exceed results as measured by agreed-upon metrics,” he wrote.

We agree and at Mercury Media we’ve put our money where our mouth is in terms of agency compensation. It’s called Cost Per Action, or CPA for TV. It allows a responsible executive to use proven DRTV strategies to aspire to real growth without irresponsible marketing allocations. Here’s how it works:

CPA for TV allows a brand to partner with Mercury Media to share the risk and reward of using the most predictable and accountable media: properly planned and purchased television time at direct response rates (30% + discount off retail tv rates). We’re a media company. We buy blocks of media time in all dayparts from all the networks nationally and/or regionally. We’ve developed a business model that allows your company to access that wealth of media in return for a share in your company’s activity driven by that media. It’s a predictable, scalable revenue sharing model that extends benefits to you long after the sales. Direct response TV works to drive sales in the short –term, we at Mercury know that for a fact as the result of our work with Neutrogena, Boost Mobile, etc.

CPA for TV goes well beyond the short term sales. It addresses the core of the agency compensation issue because it rewards sales and media expertise, not excessive and questionably justifiable overhead. Because it is a ‘frequency-based approach” it accomplishes branding goals for the future while it sells to the “right here and right now.” It generates customer information for both the converted sales and the customer that is in market for your product but hasn’t purchased yet.  It allows you to collect facts about what works for the future for your product and for your targeted customers. And it takes the air out of the agency compensation debate.

Beth is President of Mercury Media Boston and is responsible for leading the strategic direction and day-to-day operations of the national short-form practice.  Since joining Mercury in 2001 she has led the firm to significant year-over-year growth by attracting clients that include Mandalay Bay Resorts Group, LifeLock, Boost Mobile, Conair and Vegas.com.

Beth can be reached at bvendice@mercurymedia.com


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