Remember the fax machine? Or the early days of desktop publishing software? Each technological leap promised a revolution in how we worked, and indeed, they delivered remarkable efficiencies. Yet, for all their transformative power, these have quietly slipped into the cost of doing business. No one tacked on a "fax surcharge" to their invoice, right? They became foundational, enabling human ingenuity rather than demanding separate payment.
Today, you, as a marketer, are at a similar, yet arguably more profound, inflection point with Artificial Intelligence. AI, in its various forms – from predictive analytics to generative content – has been simmering within industry platforms for years, often disguised under different acronyms or integrated into existing marcom tools (eg. Salesforce, Adobe, Google Cloud, MediaOcean, and others). Many marketers in Canada have already been benefiting from these early iterations, enjoying the "AI dividend" without necessarily calling it that. It's the subtle gains from smarter ad placements, more efficient data analysis, or subtly improved content recommendations.
While the full, transformative AI dividend – the kind that redefines entire workflows and unlocks unprecedented strategic advantage – is a journey for most, requiring thoughtful marketing transformation, for some businesses already 'in deep' with digital maturity and data infrastructure, significant AI-driven strategic advantage and workflow efficiencies are already a reality. Its broader adoption and deeper integration are undoubtedly coming, creating different realities for different clients.
Yet, its full impact often hinges on a critical prerequisite: a significant investment in your marketing transformation. Without rigorous testing, confirmation, and re-engineering of processes, the most potent AI capabilities remain just that – capabilities, not impactful realities.
Against this backdrop, you might have noticed a curious narrative has gained momentum in the agency world: perhaps it’s time to scrap those familiar fee models – think "time and materials" or "cost-plus" – and embrace something new, something "value-based" or "outcome-based," purportedly driven by the advent of AI.
The Rub: New Models, Familiar Challenges, and a Complex Equation
On paper, tying agency fees to demonstrable business results sounds intuitively appealing. Pay for performance, right? But for you, as a Canadian marketer, who often operates within leaner teams and more constrained budgets compared to larger global markets, the practical implications are significant. You already grapple with the intricate dance of managing traditional compensation structures. Now, imagine adding the layers of establishing, negotiating, measuring, and perpetually managing bespoke KPIs and nebulous "outcomes" for every agency engagement.
This isn't just complex; it's a monumental undertaking that can quickly become an administrative quagmire. Defining what truly constitutes a "demonstrable business result" is a labyrinth in itself. How do you isolate your agency's impact from market shifts, competitor actions, changes in your own product, or even the performance of your internal sales force? Then comes the challenge of attribution – figuring out exactly how much of a given outcome is due to your agency's direct efforts versus the myriad other factors at play. This isn't just tricky; it's often fraught with subjectivity and a lack of true fairness.
Moreover, it's critical to understand that while agencies might propose "at-risk" compensation, the sheer costs of establishing, overseeing, and disputing these complex outcome-based models often fall, directly or indirectly, to you, the client. In the Canadian market, these oversight and management costs can easily overshadow any modest at-risk amount for the agency, making the entire model's value proposition questionable. For you, this creates fertile ground for inefficiency, misunderstanding, and misalignments with your best interests.
What often gets overlooked in this push for new models is that leveraging the most advanced AI tools for "value-based" compensation often requires significant investment from you, the marketer client. This isn't just about the agency's software; it's about your data infrastructure, integration capabilities, and internal analytical maturity. In essence, you might find yourself making substantial investments to enable a compensation model that then becomes exceptionally difficult to manage and measure without expert guidance on both the technical and contractual aspects.
The Core of the Partnership: Beyond the Tool, Towards Thought Leadership
This isn't about casting your agencies as antagonists. Far from it. Your agencies provide invaluable expertise, strategic acumen, and creative brilliance. But the fundamental nature of that partnership, and how you fairly compensate it, demands unwavering clarity and trust.
Perhaps instead of inventing elaborate new payment schemes, you should refine your expectations within existing, more transparent models. You should expect your agencies, as professional service providers, to inherently and continually invest in and master the best available tools – be it sophisticated media buying platforms, advanced analytics software, or cutting-edge AI. These tools should be an integral part of their operational excellence, enabling them to deliver services more efficiently and effectively for you. AI should be viewed as an essential capability your agency is expected to wield, not a separate billing line item. Indeed, cost-plus and time & materials compensation models are foundational to traditional professional fee models, and they remain appropriate when rigorously managed and transparently applied.
This re-focuses the lens on where true value lies in an AI-augmented world: unique human thought leadership. You need your agencies to be incisive strategists, insightful problem-solvers who can navigate complex challenges, and creative powerhouses capable of crafting compelling narratives. These are the aspects AI can augment but not replicate. You need them to deeply understand your unique business contexts, adapt to rapid market shifts, and foster authentic connections with your audiences. The more commoditized aspects of execution, which AI is increasingly transforming, should naturally become more efficient, leading to a shift in how you value and compensate for them.
The Pragmatic Path: Clear Expectations, Focused Value, and Continuous Evolution
So, as a discerning marketer, what is your authoritative and pragmatic path forward?
Demand AI as an Expected Competency: Expect your agency to utilize AI as a core operational tool to deliver superior, more efficient services. This should translate into optimized processes and potentially reduced hours for automated tasks, with those efficiency dividends benefiting you, the client, not simply creating new billing opportunities for the agency.
Prioritize Strategic and Creative Thought: Direct your compensation towards the high-value, human-centric services that only brilliant minds can deliver. Pay for the innovative strategies, the breakthrough creative concepts, and the invaluable human insights that truly move the needle for your business.
Insist on Unwavering Transparency: Maintain a clear, understandable line of sight into how your agency operates and bills. Traditional models, when rigorously managed, offer this transparency. If "value" is discussed, ensure it's rigourously defined with unambiguous metrics, mutually agreed upon, and genuinely measurable, rather than rely on nebulous concepts that lack accountability.
Cultivate a True Partnership: View your agency as an integral extension of your team. Engage with them as trusted advisors who leverage every available tool, including AI, to achieve your overarching business objectives. This collaborative spirit, grounded in mutual understanding and clear expectations, is far more effective than chasing complex, potentially opaque compensation models.
The future of agency remuneration isn't about abandoning established models for complicated new ones. It's about recognizing that while the AI dividend is coming, it requires thoughtful marketing transformation to unlock its full potential. Your focus must remain on the irreplaceable human intellect, strategic foresight, and the trusted partnership that truly drives business impact.
What are your experiences navigating these conversations with your agency partners here in Canada? How are you ensuring your compensation models align with the real value AI brings? We at Reynolds & Fyshe are dedicated to helping Canadian marketers address these complex issues. Reach out to us to share your insights and discuss how we can help you achieve greater clarity and value.
This blog post was drafted in part with the help of Gemini, but the content was reviewed, edited, and fact-checked by me.