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Ford Motor Co. last week became the latest major marketer to change the way it compensates ad agencies. Ford said it will stop paying brand agencies commissions on its $1 billion-plus ad budget and will instead introduce a performance incentive and labor-based system.

"The new arrangement will enable us to optimize our return on our marketing investment," said David Ropes, director of corporate advertising and integrated marketing at Ford. He said Ford worked with its agencies to develop the system, noting, "Usually clients call in consultants, then dictate to the agencies."

In the U.S., Ford's key agencies are J. Walter Thompson USA, Detroit; Y&R Advertising, Irvine, Calif.; Ogilvy & Mather, New York; and W.B. Doner & Co., Southfield, Mich.

"The world is moving toward this," said JWT's Don Topping, senior partner-executive management director of strategic services. "Clients are doing more than media advertising and agencies are doing more than media advertising, so having compensation based on media is a little out of date."

Mr. Ropes said the performance incentives will be based on three criteria: qualitative annual agency reviews, in-market effectiveness measurements and meeting profit goals.

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