Mexico's ad trade group follows the money with new model to get paid
With agencies doing more for less, some in Mexico have taken matters into their own hands: They're calculating fees based on a remuneration model that focuses on the amount of content produced for each client.
"We need to [talk] about value and creating more valuable work for clients, but need to create the conditions for that to happen," says Sebastián Tonda, president of the board for the Mexican Association of Advertising Agencies and CEO of Dentsu agency Flock.
Currently, 20 association agencies use the system. The model is based on a concept from chairman and CEO of New York-based consulting firm Farmer & Co., Michael Farmer, and uses a proprietary "scopes of work" (SOW) database. The database, says the Farmer & Co. website, "includes over 6,000 unique briefs across all media types. [Each brief] has a unique ScopeMetric Unit (SMU) value. The sum of the SMU values from each deliverable ... equals the total 'workload value' or size of the SOW in ScopeMetric Units."
Back in the early '90s, Farmer notes, an agency with 50 creatives would produce about 385 pieces of work a year for a single client. Today, he says, an agency with 50 creatives can produce upward of 14,750 deliverables. Agencies "need to be paid by the piece, like running a factory," says Farmer.
Tonda says that after the process he saw more clearly how much work Flock was doing. The agency then spent 2017 visiting clients to discuss the model. Tonda says it wasn't all about increasing pay—often it was about figuring out ways for the agency to deliver fewer, high-quality deliverables efficiently.
Mondelez, Jose Cuervo, Walmart and Nike, among others, agreed to evaluate their relationships with Flock using Farmer's model, but Tonda says not every client agreed.
"Some reacted negatively and didn't feel comfortable being charged on the number of deliverables, so we decided to part ways with them," says Tonda. He declined to disclose which relationships were ended that way.
The industry, he says, is divided, with agencies fighting for shares of the business. "We need to solve the problem by benchmarking advertising," says Tonda, "and figuring out how to create value more strategically for clients."