What is value based remuneration for advertising and media agencies?
There’s a lot of talk about Value Based Remuneration and possibly a lot of confusion as various models get bandied around purporting to be value based. There are several approaches to this remuneration methodology, but the basic principles for defining value is either the value of the work done for the buyer (output) or the value of results delivered (outcome) or any combination of these. How is this applied to advertising and media agencies?
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Value based agency remuneration considerations for direct response and retail advertisers
When developing a value based remuneration model for your agencies it is important to consider what approach to value you take. If you measure performance of your advertising directly such as in direct response and some retailers, then a results approach to agency remuneration is ideal. This allows you to pay the agency based on their contribution to the value created. This is especially relevant where marketing is performance measured.
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What is the best agency remuneration model for every advertiser?
As marketers are moving away from agency retainer to more agile and flexible remuneration models, there is a desire to find the right model for their needs. But there are also more models and variations on theme for remuneration than there are agencies. So, what is the best value agency remuneration model for you? That depends on a few key criteria and your current circumstances.
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Three ways to pay for programmatic media but only one that delivers value
There is much talk about the efficacy and value of programmatic buying. While programmatic media buying is ideal for driving results, when it comes to how you pay for your programmatic media it could be that the best approach is a value based model that pays for results and not simply eyeballs. In this way, you overcome issues of viewability and fraud because you are paying for the results achieved and not just the audience.
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How Value Based Remuneration can support Zero Based Budgeting
Many of the global consumer goods companies have embraced Zero Based Budgeting (ZBB) for their marketing programs to better align performance and growth with the marketing investment. Value Based Remuneration that sets a price of value for the work that the agency delivers can support the ZBB process by making the agency costs more defined and predictable against the projected return on the investment.
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How to develop a price based remuneration model for your agencies
How do you go about defining the value of the outputs your agency creates for you? Up to now, the only value equation has been the cost of the agency inputs, which is a good starting point in then defining the value of the outputs based on the projected return, and the strategic importance of the work. It is a process that calls into question the value of the work of the agency, for both parties; the advertiser and the agency themselves.
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The latest trends in agency remuneration
Wondering how Value Based Remuneration fits into the latest thinking in agency remuneration? As remuneration experts, we are constantly keeping track of the trends in agency remuneration and can see that Value Based and Results Based Remuneration is gaining in popularity but also relevance, as more advertisers are focusing on the performance of their marketing plan in driving company growth.
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