Payment by results (PBR) will form part of 75 per cent of advertising agency contracts within five years, says a report by the Incorporated Society of British Advertisers (ISBA).
The report, published this week, shows the traditional commission system – where agencies are paid a percentage of the client’s media spend – is rapidly being replaced by PBR.
The PBR system in the UK is growing by 20 per cent a year for creative accounts, and 28 per cent for media agreements. It is more likely to be used on higher annual budgets and at larger agencies, the report claims.
The trend was accelerated last month when Procter & Gamble announced it would be moving to PBR.
Three-quarters of agencies with PBR believe their agreement provides a better incentive for agency effectiveness.
The rapid rise of payment by results has been welcomed by ISBA, which believes it leads to better client/agency relations.
Rupert Howell, chairman of HHCL and president of the Institute of Practitioners in Advertising (IPA), says: “This is a well-researched, comprehensive and sensible study which should encourage clients and agencies to pursue at least an element of PBR in their remuneration agreements. I would like to urge all agencies to discuss its contents with their clients.”
The research was carried out by ISBA and the Advertising Research Council. It includes interviews with eight leading advertising agencies and 25 summaries of PBR schemes.