In times of high inflation, payment rates and models dominate negotiations between vendors and customers. Not surprisingly, ad and media agencies are facing advertiser angst on this score.

My last column dwelt on how media specialists are eyeing creative payment models based on royalty, percentage of brand sales, etc. I say it’s time agencies took cues from advertisers pushing for entrepreneurial-based systems over time-based compensation.

Marion Arathoon

Greg Paull, principal and co-founder of R3 Asia Pacific, a consultancy focused on improving marketing efficiency, says some marketers are tracking time and rewarding efficiency. “You can’t improve what you don’t measure. You have to track rounds of revisions, time wasted at different stages, time lost because of inefficiency," he says. “You have to create a new working dynamic, as Coke has now done in China, to drive greater innovation, integration and efficiency."

Digital media is seen as a saviour in these difficult times. Since the medium is still nascent, it is harder to arrive at standard payment benchmarks such as commissions or hourly rates. The truth is, advertisers and agencies are fuzzy about how much to pay for or invest in digital media. Paull has some suggestions:

Go back to “e-school": The biggest problem marketers face in paying creative agencies for digital work comes from lack of knowledge. They do not know about Flash software and multimedia technology and how they work, how digital work is created and what its limitation are, and importantly, how consumers interact with the Web. The best agencies factor in time to make their clients aware of all this. They go beyond reactive project-based work and treat the marketer as a partner in the digital journey.

Digital is not just another medium, it’s a way of life: From a creative perspective, most marketers and agencies still treat digital as a medium to be consumed. We need to extend the look and feel of our television onto the Web, they say. Well, many online customers may never interact with TV.

Respect the time it takes a media agency: A typical media agency can’t effectively buy online media at 2, 3 or 4% commission since most buys involve more work, more collaboration, content negotiations and detailed analysis. There’s no guideline on what it should cost, since each client uses its media agency in different ways for online media. Don’t treat online media buying with the same commodity mindset as TV and print, or you will end up with activities that do not get noticed. Use the analysis to your advantage; pay the agency a variable remuneration based on results that are easily tracked through the effectiveness of a campaign. One of R3’s clients recently ran 94 different creative units for one promotion — each was tracked and measured to the smallest detail.

Overestimate your online spend, and test: It’s amazing how clients and media agencies can mutually agree to spend 1-3% of media on something people are interacting with for over two hours a day. Clients in Asia do not spend enough on online due to poor selling strategies by online owners, poor knowledge of media agencies and risk-averse clients. Coca-Cola in some markets is now spending 15% of its campaign budgets on digital media. Would it do so if it wasn’t getting results? Of course, the beauty here is the ability to test and learn — to experiment, to conduct research before and after, and even track online campaign effectiveness.

Marion Arathoon is Mint’s advertising editor. Your comments are welcome at