Agency commission system sinking

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Only 14% of advertisers responding to an Association of National Advertisers survey on agency compensation said they still use the traditional 15% media commission, a dramatic decrease from the 33% of respondents citing the traditional commission system in the ANA's last survey in 1992. Reduced-rate commissions were the most prevalent form of compensation, cited by 45% of 1995 respondents. Labor-based contracts were cited by 35%. In terms of reduced-rate commissions, 21% of respondents said they used sliding-scale commissions that yield less than the traditional 15% commission, up from 12% cited in 1992. Flat-rate commissions that yield less than the traditional 15% commission were used by 24% of respondents, up from 12% in 1992. About three-quarters of respondents using labor-based fees said they were built up from dollar estimates of the cost of agency direct labor, plus agency overhead and profit. The size of an advertiser's ad budget was a key factor in determining the type of agency compensation: Advertisers with budgets of less than $10 million were more likely to use labor-based fees, while advertisers with budgets in excess of $50 million were inclined to use a commission system with a rate below 15%.

Copyright 1995 Crain Communications Inc.

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