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is your agency remuneration working for you &
your agency?
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Welcome to the
first 'p3 news' for the new financial year 2003 / 2004. Time to start
planning, or at least considering, the annual review of your
remuneration agreements.
In this edition
we look at the various remuneration models and
highlight the advantages in developing the right model to suit your
needs and objectives.
We have also been busy moving
offices in Melbourne from Southbank Blvd to St Kilda Road
and setting up premises in Pitt Street, Sydney. Details
below.
p3 - helping people achieve
commercial purpose through creative process
Add a colleague to the 'p3 news' mailing list, by emailing
their details to people@p3.com.au
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imagine a free advertising
campaign
The objective between two
parties entering into any long-term relationship is that both profit
from the partnership.
The advertiser: increases sales through growth in
their market share utilising effective advertising and marketing
strategies.
The advertising
agency: selling its knowledge and know-how in delivering
these outcomes.
Therefore, the key question is what is a fair price to
pay?
Any Remuneration Model must be fair to both parties, otherwise why
would the agency do the work? There are varying ways to remunerate
the Agency for work performed. One must pick the model that best
suits both parties making sure that you achieve the objectives of the
advertiser.
You can utilise any of the following or a combination
thereof:
Fixed
Retainer
With a fixed retainer the agency will ascertain and
charge you for a perceived usage of their staff to deliver the work
required.
Strength - one charge, consistent.
Weakness - cannot monitor performance and doesn't
allow for low workload periods.
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Service Fee Charge
Favoured by many Media agencies, you will be charged as a percentage
of spend.
Strength - consistent charge and therefore
remuneration is in direct relation to spend trends,
lower/higher.
Weakness - cannot monitor performance and gives rise
to over remunerating for tasks that the agency had little or no
input. Can also encourage agency to recommend more expensive
options.
Head Hours Charge
You are charged for what you use.
Strength - You pay by project and utilisation and
therefore remuneration is directly related to the size and number of
tasks performed.
Weakness - Difficult to monitor efficiency and can
in fact encourage agency to operate inefficiently to increase
revenue.
Combination of the above
A combination approach can be utilised, with a cost
effective mixture of fixed fee, variable rate per hour and external
costs recharged at net for the service required.
In creating an effective Remuneration Strategy, the advertiser must
undertake to achieve a combination of the following:
- No degradation of service and quality of advertising
- Creation of more effective communication strategies
- Lower cost per campaign
- Make the agency accountable for costs
P3Biz has assisted many advertisers to develop remuneration
agreements using our benchmark models based on industry surveys
and financial modelling. These provide advertisers with a framework
so that they can evaluate the cost of services provided by the
agency.
Remember, your budget in any fiscal year is normally fixed.
Therefore any savings you make through your Remuneration
Strategy could effectively give you another campaign or program
for FREE.
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| P3Sydney & P3Melbourne |
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P3 now has new offices in Melbourne and Sydney.
P3 Sydney - Level 5, Angel
Place, 123 Pitt Street, Sydney, NSW, 2000
T: 02 9221
0265
F: 02 9221
0179
P3 Melbourne - Suite 3, Level 3, 450 St Kilda Road,
Melbourne, VICTORIA, 3004
T:03 9378
3223
F:03 9379
8415
E: people@p3.com.au
P:
PO Box 202, Essendon, VICTORIA, 3040
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