Opinion

Media agency boss: we’re giving clients too much for free

Malli CRA recent spat in India over the media commission system has brought client-agency remuneration back into the spotlight.

Mallikarjunadas CR, the CEO of Starcom MediaVest Group India, tells Mumbrella Asia editor Robin Hicks that media agencies are still miserably underpaid for the services they provide.

Do you think the days of the commission system are coming to an end in India?

Over the longer term, it is probably on its way out. It is a legacy system that includes creative and media in the remuneration model, and is increasingly rare. But in any case, the media part is small. In the days of 15 per cent commission, media used to be just three per cent. It’s not even less.

The fact of the matter is that media agencies are grossly underpaid for the services that we now provide. Media planning and buying is very different to how it was done 20 years ago. The complex media landscape we now live in requires a different type of talent to navigate it. We need to recruit a higher calibre of people to take meaning out of this complexity, and that costs money.

How do you think media agencies should be paid differently?

Just like creative agencies, we have a tendency to give ideas away for free. We need to find a model that monitises the services we offer fairly. If we hire a strong analytics team made up of well-paid specialists, should we be remunerated differently? Yes, of course we should.

You can’t give that sort of thinking away for free. You need to go to the client and say that this is not a standard service, you must pay extra for it. Analytics, branded content and insights – clients should be paying extra for these services.

Why are media agencies in such a tight spot now?

In some cases it’s because agencies have cut their rates in pitches to win new business. But historically, it’s because of the media market boom from 2001-2006 and the satellite TV revolution in India. A talent crunch hit the media planning and buying industry as the top people left to join broadcasters, went client side or migrated overseas. Because agencies lacked the talent, their clients saw no good reason to pay a premium for their services, and media agencies started charging less and less as desperation set in.

Wouldn’t throwing out the commission system and introducing performance-related pay makes things fairer?

The commission system is not inherently bad. With some clients it makes sense. The commission rate is currently 2.5 per cent. To make commercial sense to us, it should be 4.5 per cent. We have some clients who pay us on a commission structure, others on a fee, some use a hybrid model.

The problem comes down to talent. We need to attract the best young people, but are being priced out of the market for business school graduates. At the moment, the industry is really struggling to attract these recruits, most of whom have big student loans to pay off, from the top 50 b-schools in India.

If we continue to struggle to attract the top young people, then we will always struggle to get properly remunerated for the services we provide.

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