The Impact of AI on Marketing Agency Remuneration Models

Artificial intelligence (AI) is transforming advertising agencies’ operational structures and client engagements, as well as campaign targeting, analysis and optimisation.  The investment by the industry in AI is eyewatering.  The Holding Companies and major networks are investing millions in AI.  In our conversations with Holding Companies and major networks, while there is enormous excitement and expectation about the potential of AI, there is one area that they haven’t quite got their heads around – the business and commercial model for their clients.

In the evolutionary curve for AI in the marketing comms industry this first phase of development offers significant efficiency gains – doing more, quicker.  And therefore, for an industry traditionally built on time and resource, that implies cheaper.  We heard of one client who put a red pen through the agency fees cutting costs by 30% when they heard about potential efficiency gains delivered by AI.

But clients slashing fees is incompatible with the level of investment required by the agencies.  So there needs to be a proper conversation about cost vs value – rebalancing the conversation about fees, deliverables and outcomes.  While AI can enable a reduction in costs it also enables increased output and, done properly, better outcomes – both of those should be paid for.

So, what are the potential commercial and remuneration models for clients and their agencies?

More Fixed-fee Structures?

AI automates many time-consuming tasks such as data analysis and media buying, even as basic as account management reporting allowing agencies to allocate resources more strategically. This automation reduces the need for labour-intensive work, making traditional billing less relevant. Many agencies are thus moving to project-based or fixed-fee structures, emphasising value delivered over time spent, with AI’s efficiency enabling agencies to manage more projects and scale up without a direct correlation to labour costs.

Shift Towards Performance-Based Models?

AI’s real-time analytics and improved measurement capabilities now allow for more precise tracking of campaign results, enabling a shift toward performance-based remuneration. The commercial model based on measurable outcomes like click-through rates, conversions and sales, makes AI-driven insights pivotal for optimising campaigns and aligning compensation with tangible results.  Better outcomes equals better value.

Subscription-Based Models

With AI integrated into continuous optimisation and reporting there’s an opportunity to adopt subscription models. This approach provides clients with consistent monthly or annual costs in exchange for ongoing access to tools enabling better workflow and reporting.  For agencies, the subscription model offers stable, recurring revenue, while clients benefit from regular performance enhancements.

Transparency and Data-Driven Pricing

AI’s data transparency allows clients to see campaign performance with more clarity, raising expectations for accountability. This enables value-based pricing, charging clients based on the unique insights and strategic direction AI provides. By uncovering consumer patterns, agencies can justify premium fees for data-backed recommendations that go beyond execution.

Conclusion

AI is driving the marketing and communications industry towards a debate and hopefully conclusion about cost versus value.  Toward more efficient, transparent, and performance-oriented remuneration models. As AI continues to redefine value in marketing communications, agencies that balance innovation with adaptable pricing strategies will excel in this competitive market.  Despite the challenges of adapting remuneration frameworks to this new era, at least rebalancing the conversation from fees to deliverables and outcomes is a positive step for the industry.