AdAge has a great post titled ‘How Long Does It Take to Think a Thought?’, on the issue of agency compensation. The author argues that by linking compensation to time, agencies have devalued themselves and their core product: the thought. He says that clients reward us for the execution of the thought rather than for the thought itself.
In India, where the media commission (15% or otherwise) is more common than a fee, the need for a meaningful dialogue between agencies & clients is even more heightened.
Even when an agency is remunerated (I would not say compensated – because that it implies a just compensation!) with a fee – it is largely based on the number of projects in the year and the requisite head-count to manage that. Within that fee – one is expected to deliver ideas of all kinds – strategic, creative and media. Some of the ideas may boost the client bottom line tremendously. But the only upside to the agency in that scenario is the *possibility* of an incentive the next year. At the time of yearly negotiation on the fee, the discussion is usually centered around resources. It is not about putting a price to the quality of ideas.
Agreed that there is no clear, hard & fast rule to arrive at the price of an idea. But when agencies get penalized for what are perceived as poor ideas (meaning, no incentive), why should they be denied a fair compensation when it comes to good ideas?