WHY COMMISSIONS SURVIVE

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The results of the latest Association of National Advertisers survey of agency compensation systems are heralded as signaling the death throes for the 15% commission system. Maybe the 15% part is dying but, surprisingly, the commission system itself is still very much alive and kicking.

The ANA survey shows that 59% of clients still use some form of commission payment, the same percentage as the last survey, done in 1992. The big swing is away from the old standard 15% commission-down from 33% using it in '92 to 14% now. But reduced commission systems are in effect with 45% of clients now, up from 26% in the earlier survey.

The tenacity of the commission system seems surprising at first glance, given the rise of new media and the shift of emphasis within most marketing budgets from mass media advertising to promotions and related activities. But clients say they're more comfortable with the commission system and not anxious to set up fee systems or incentive-based systems. And today's typical lean and mean ad agency can prosper on less than 15% of the media budget.

Yet the demise of the 15% standard has contributed to a major change in agency-client relations. When most in the industry accepted the 15% media commission system as the norm, advertisers looking for an agency could concentrate on their advertising and marketing expertise, with no haggling over costs. That helped engender the marketing partnership relationship. Now, as cost enters into the equation, the agency looks more like a vendor, competing to see who can provide creative excellence at the lowest price.

Today's changing ad media scene means further refinement of compensation systems is inevitable. Agencies that take advantage of the new channels of communication with consumers will be valuable partners to clients. But advertisers who put agencies' backs to the wall to squeeze out a better compensation deal will, as always, get what they pay for.

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