It was a downright intimidating array of senior Toronto agency people who turned up at the Association of Canadian Advertisers’ offices in Toronto at 8:00 a.m. on May 24. Among the more than 30 agency CEOs, general managers and CFOs were Burnett’s Jim McKenzie, Grey’s John Clinton, HYPN’s David Harrison, Genesis Media’s Bruce Claassen, JWT’s Ruth Drake and AMW’s Arnold Wicht. They were there for a briefing on the ACA’s new, and closely guarded, report on payment by results. They came to listen, but they looked and sounded skeptical.

The briefing, led by York University marketing prof and ex-agency CEO Alan Middleton, who co-authored the report along with Alan Kay and Rick Wolfe both also ex-agency execs and both also on hand, was basically the same one ACA members got earlier in the month. That ACA would share the essential details of a members-only report with the agency community speaks volumes about the sensitivities surrounding PBR. As ACA vice-president Susan Charles notes, if any of the ideas stand any chance of being implemented, they need to be embraced equally by clients and agencies. And it’s important, she says, for the ACA to send the message to agencies that it is clients that will have to walk the walk first and foremost.

Middleton, in fine grad-seminar form, stressed that the point of PBR isn’t about cutting fees to agencies. In fact, the report is pointedly titled "Improving the Marketing Communications Value Chain" to reflect that. The benefits of PBR, he outlined, include greater efficiency and accountability, greater mutual understanding of goals and an increase in agency engagement with and input into client marketing efforts. Yes, there ought to be cost efficiencies, but there also ought to be cost outlays for clients such as spending on new, mutually agreed-upon measures of ad and marketing effectiveness. And PBR has to ensure that agencies can make more money than they do now on a client’s piece of business. As a base, Middleton said, agencies need to cover their costs, plus, before any incentive scheme kicks in.

Reassuring words for agencies, but words that agency executives are inclined not to believe. Despite the repeated message that PBR discussions must go beyond mere detailed haggling over fees, the agency people at the briefing zeroed in on the money and stayed focused on it. All their questions and comments addressed it, with the underlying subtext that, in the end, clients won’t truly embrace something that costs them more money. As well, any results-based payment scheme, they argued, would mean that agency pay would be based on macro indices, like profit, total sales or share, that agencies have little ultimate control over.

All true, came the answer. But PBR should be based on a mix of payment measures, and other more directly relevant indices can be used in that mix. But, in a way, Middleton said, the whole PBR discussion is about finding ways to show how advertising does, in fact, make a real difference to profits, revenue and share.

The phrase "the emperor’s new clothes" came up. McKenzie was perhaps the most frank. Even if you negotiate a 10% base-level profit, he said, with an international parent company mandate of a 20% ROI he has to get a mark of "A" to meet his numbers for his bosses. And how often are you likely to get an "A"?

Middleton suggested that payment thresholds should be built with that in mind. But, he added, the discussion needs to be "reframed." It should be more about "How can I help you, Mr. or Ms. Client, make more money and thus earn more myself?" Given the status quo, he asked, what do agencies have to lose?

Wolfe urged agencies to look at the issue from beyond their small corner of the business food chain. If they do, they’ll see that the reason clients want this discussion now is that they, too, are under more pressure to be accountable.

Still, the hard realpolitik of the client-agency relationship is impossible to deny. And ACA concedes that PBR is not for everyone. Indeed, judging from the report’s outline for the stages of readiness, as few as 10% of all client-agency relationships may ever fully and completely implement PBR. But, Charles noted, the very discussion of the readiness of the client-agency relationship for PBR and what should be measured and how is probably what matters most.

After the briefing, I suggested to Charles that, given the comments in the room, selling PBR in an economic downturn might be near impossible. She answered that there may, in fact, be no better time to take a serious look at change than when money is harder to come by.

ACA fully expected the skeptical-verging-on-cynical tone of the agency reactions. And the agencies have legitimate points, says Charles, that need to be talked through. But the discussion has to start somewhere.