The fee-based system no doubt ensures a fair compensation to cover an agency's direct salary, overheads and profit margins, but agency also want to earn an incentive if its campaign works well and delivers the desired impact in the market.
When its clients profit, it want them to share it with them in a small way. The commission-based system also pays back to the agency in terms of royalty for the intellectual value that it sells its client in the form of a successful campaign, but the fee-based system has no mechanisms for this element of compensation.
The agencies feel advertisers want to switch to the fee-based system mostly to cut costs, but in the long run are compromising with the passion and equity an agency shares with a brand.
On the other hand, there is a segment which feels that the fee-based system is a much more professional and efficient way of doing business. Agency get paid for the services it provide, not based purely on the amount spent in media. It's a more open and clear way of paying the agencies. It's still in its infancy, but should settle down to being the most common method of remuneration.
By and large most Indian companies prefer a commission system, whereas the big spenders among multinationals prefer a fee system which is either mandated by their global headquarters or want to follow what is practiced at their headquarters. Indian companies prefer a commission system as they believe paying their agency in proportion to their spends (which in some way is equated to the work the agency does) is fair."
This debate is relevant only to a few top advertisers of the total of about 3,500-4,000 advertisers in the country. Therefore, the Advertising Agencies Association of India also believes that the relevant system for the country is the 15 per cent agency commission system. So do the Indian Newspaper Society and the Indian Broadcasting Foundation. It is simple, direct, easy to compute and does not lead to discussion, negotiation, dispute or misunderstanding
When its clients profit, it want them to share it with them in a small way. The commission-based system also pays back to the agency in terms of royalty for the intellectual value that it sells its client in the form of a successful campaign, but the fee-based system has no mechanisms for this element of compensation.
The agencies feel advertisers want to switch to the fee-based system mostly to cut costs, but in the long run are compromising with the passion and equity an agency shares with a brand.
On the other hand, there is a segment which feels that the fee-based system is a much more professional and efficient way of doing business. Agency get paid for the services it provide, not based purely on the amount spent in media. It's a more open and clear way of paying the agencies. It's still in its infancy, but should settle down to being the most common method of remuneration.
By and large most Indian companies prefer a commission system, whereas the big spenders among multinationals prefer a fee system which is either mandated by their global headquarters or want to follow what is practiced at their headquarters. Indian companies prefer a commission system as they believe paying their agency in proportion to their spends (which in some way is equated to the work the agency does) is fair."
This debate is relevant only to a few top advertisers of the total of about 3,500-4,000 advertisers in the country. Therefore, the Advertising Agencies Association of India also believes that the relevant system for the country is the 15 per cent agency commission system. So do the Indian Newspaper Society and the Indian Broadcasting Foundation. It is simple, direct, easy to compute and does not lead to discussion, negotiation, dispute or misunderstanding