It's crucial for Canadian marketers to be prepared to critically evaluate claims about AI’s impact on compensation models. Agency services are professional services, and like other professionals, agencies are expected to continuously evolve their practices and leverage the best available tools, including AI, to deliver services effectively.
Here’s a look at some arguments you might encounter regarding AI and compensation, and the counterpoints you can use, grounded in realism and focused on verifiable client value:
Navigating Common Claims About AI & Compensation: Key Client Considerations and Responses:
Claim: "AI fundamentally changes how value is created, moving beyond just time and effort. Our compensation needs to reflect this new value."
Client Counterpoint: Acknowledge AI changes how work is done, but compensation is for the outcome and quality of the marketing service delivered effectively. AI is a tool enabling this, not a new basis for charging purely because the effort is reduced.
How clients can phrase it: "We agree that AI is changing the tools and processes agencies use. However, our agreement is fundamentally about the marketing outcomes and business value you deliver to us. Your internal methods, including AI, are what enable you to deliver against those objectives efficiently, which is what we are compensating you for. Reduced effort on your side due to technology doesn't automatically translate into a commensurate increase in value for us, the client, that warrants a fee change."
Claim: "Our significant investment in AI platforms and capabilities gives us unique advantages that justify a shift to outcome-based or value-based fees."
Client Counterpoint: Challenge the notion of truly unique AI advantages in a market where core AI technology is widely accessible. Position access to and effective use of AI as a baseline requirement for a modern agency.
How clients can phrase it: "We appreciate your investment in technology. Could you clarify what aspects of your AI application or approach are genuinely unique or offer a measurable advantage over what other competitive agencies can achieve using readily available AI tools? From our perspective, leveraging best-in-class AI tools is becoming an expected capability for any leading agency."
Claim: "AI drives efficiencies, but also unlocks new levels of performance and insights that weren't previously possible, requiring a new commercial model to capture this elevated value."
Client Counterpoint: Demand concrete, verifiable evidence of how AI consistently delivers incremental value directly to the client's specific business outcomes that goes beyond the expected service level and was previously unattainable. Be skeptical of generalized claims.
How clients can phrase it: "We're keen to see how AI translates into tangible results for our brand. Can you provide measurable proof of how your AI application is consistently delivering incremental, verifiable value directly against our agreed-upon marketing KPIs, beyond what we could expect from standard practices or other agencies? Generic claims about 'new levels' aren't sufficient justification for a fee change."
Claim: "We need new compensation models to fund ongoing AI investment and innovation necessary to keep you competitive."
Client Counterpoint: Frame the agency's investment in AI as a necessary business cost for them to remain competitive and deliver services efficiently, not a reason for the client to guarantee their investment returns or fund their R&D through a new compensation model for existing services.
How clients can phrase it: "We understand that staying at the forefront of technology requires investment. However, the cost of equipping your agency to deliver services efficiently and competitively, including through AI, is an operational cost for your business, similar to investing in talent or infrastructure. Our compensation is for the value you deliver to us, not designed to guarantee your internal investment returns or predictable revenue streams in the face of your changing cost structure."
Claim: "Value-Based Compensation is the Future" (When Pushed Prematurely or Primarily for Agency Benefit):
Client Counterpoint: Acknowledge that value alignment is a theoretical goal, but highlight the significant practical complexities and costs for the client in implementing and verifying truly outcome-based models. Demand a proposal that demonstrates a clear net benefit to the client after accounting for these overheads, questioning if the agency is prepared for the rigor and shared risk involved.
How clients can phrase it: "While aligning compensation with value sounds good in principle, implementing rigorous, verifiable outcome-based models is complex and can be costly for us, requiring sophisticated measurement and potentially third-party verification. If proposing such a model, you'll need to demonstrate a clear net benefit to our business after accounting for these complexities and costs on our end. Is the agency fully prepared for the transparency, shared risk, and measurement rigor this entails?"
Navigating these conversations requires clarity and a focus on partnership rooted in mutual, verifiable value. By understanding the common claims and having clear counterpoints, you can ensure that discussions about AI and agency compensation are grounded in reality and focused on driving tangible results for your brands.
At Reynolds & Fyshe, we're here to help senior marketers navigate these complex dynamics with informed perspective and ensure your agency partnerships deliver verifiable returns that align with your business goals.