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Media Commission

I would like to know how much agency's are charging for media commission. We charge 17.65%. I was told it is standard agency practice not to charge for media planning and buying, it is covered under the commission, is this true and if so why is it not done for mark up on printing?

Thanks,

Ed Miller

We have one client that we charge media commission at 17.65, otherwise our clients pay net on media but pay for our services.

John Jensen

We also charge 17.65% on those clients that we do not have a monthly fee set up. This 17.65% covers the media planning and buying.

On printing we mark it up 20%

Ann Adams
Controller
J. Stokes & Associates
common sense | uncommon thinking
www.jstokes.com

Ed,

A few thoughts-

There are many ways nowadays that agencies are compensated for media planning, negotiating, research, buying, verifying, and posting. It has been standard for agencies to receive 15% in broadcast (radio/television) commissions for placing buys, and it used to be standard to receive 10% commission in newspaper with 15% for magazines. However, some large client accounts where millions of dollars are placed negotiate commissions as low as 3% for agencies - invoices between agencies and clients versus invoices to agencies can often differ with this being one of those reasons. Many newspapers would not issue gross and net invoices partially due to the volume of daily clients, and so agencies had to mark those up when invoicing their clients to justify the time, equipment, materials, and personnel for the job. Eventually, most newspapers (although not all) have dropped gross rates and only work with net rates.

Nielsen and Arbitron ratings have been well utilized in broadcast buys, and the purchase of that by an agency is often paid for from media commissions - so many agencies wouldn't purchase broadcast without having the commission invoicing system. And, without broadcast purchasing Nielsen and Arbitron themselves, they would be left out of many buys. Print is a different story as ABC's can be obtained directly at no cost from the print company - this audit is necessary for most print to have their business; however many smaller newspapers don't bother with it at all. Newspapers have traditionally catered far more to individuals and very small local companies than broadcast, and the newspapers don't always feel they need the clout of an ABC audit to be in business. Newspapers are not normally ranked against other newspapers in a single source like broadcast is in Nielsen and Arbitron reports.

Nowadays, an agency and a client create an agreement/contract that works for both of them. It may include retainer fees for servicing the account above and beyond what media commissions provide, especially if actual commissions would not cover the expense of the agency's doing business for that client. It may include paying an hourly rate for all services rendered plus a retainer fee.

Sometimes if a retainer fee is high enough, media services are provided at no charge as part of the contract.

So as you can see, media commissions/fees are based on what is needed by the agency and what services the client needs from the agency. There is no absolute in the matter. Sometimes what works well for an agency with one client does not work well for another - so even within agencies there are variances in contracts from one client to another.

MediaPost.com has published some interesting chat room dialog about this issue - you may want to check out that source.

Nora Kim Green

We also charge 17.65%.

Jenny Hartman

Standard Agency practice in Canada is 15% commission. However, we do charge for media planning if a client does not go through with a sizable plan we have worked on and provided the client with.

Janice Young

You have to look at your media dept as a completely different profit center from the creative, account service, production portion. If you markup media costs 17.65% that equates to a 15% commission. That is pretty much standard and covers for your media time, unless you have a client that doesn't want to pay commission, in which case you would charge for the media time or an agreed upon amount. The markup on printing (or any other production costs) can vary from 0 to 25%, depending on the agreement you have with your client. That markup couldn't possibly cover the amount of time the agency spends on creating, writing, managing the project, etc. so that would be covered under your agency fees. The markup on production helps to cover general costs that may not be billed to client-such as copies, postage, long distance charges, etc. or any unforeseen charges that you cannot bill to the client. It also helps with the bottom line, and if you relied solely on production markups, you would soon go out of business.

lee

Of course, a 1.765% mark-up of a net amount is approximately the same as 15% of the gross amount.

Nora Kim Green

Our agreements with our clients vary. Some want to be billed for actual planning and buying, some prefer it be part of the fee and some we bill commissions. If we bill commissions then we don't bill for media hours. In my mind there isn't a standard way of handling media anymore. We would like to bill our clients 15% on the gross but clients tend to want to negotiate it down. If it is a client with sizable media a monthly fee that would include media planning and buying is also a good way to go from the client's and the agency's viewpoints. When you are negotiating a monthly fee you have to put a value on the media planning and buying hours and compare it to the 15% commission and come up with a good number. Just to clarify we usually take 15% commission on the gross or 17.65% on the net. IE 17.65% of net of $85 is a gross of $ 100 and a commission of $15. And 15% of $ 100 gross is $ 15 commission. There are also media buying services that undercut pricing and may handle the media end for clients. The advantages and disadvantages are debatable. Markup on printing usually covers the estimating phase and the cost of the production manager and traffic department.

Bill Scarpa

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Rudy Socha

If an agency is billing gross media to a client, and keeping the commission from the media (at 15%), what services are typically covered for that commission? We're talking $3M - $5M per year! I suspect that media planning and buying are typically covered. But what about account management and production time? If these services are also covered, how do you track these "unbillable" hours in C&P?

Debra Frushour
MarCom Group, Inc.
Fairfax, VA