Compensation of Advertising - Research Paper Example

Compensation of Advertising Background History and Problem Today, the major attributes of media are reckoned as greater control over the activities conduct by the owners of media and the association persisting between media and politics. Traditionally, it can be found that media does not have specific effects on groups. It is an institute, which provides valuable information related to several matters of society and also support the individuals to work upon the public matters on behalf of the public. Media provides the information as well as knowledge basically related to any sort of event (Becker, Vlad & Simpson, 2014). On the other hand, advertisement is also viewed to be an important practice, as it provides the information related to the course of marketing, process of communication and more importantly marketing strategy that deemed to be essential for ensuring long-term growth and profitability. Mass media can be defined as the expanded media, which incorporates varied technologies to reach into masses through the mass communication process. Mass communication can be described as the study representing how individuals depend on the information through media to obtain any vital information about various objects. Both mass media and mass communication are important to consider in transferring information with using similar type of media (Advertising Educational Foundation, 2015). Mass communication helps an organization to transfer message to a group of people within a definite time. In relation to the above context, advertising can also be defined as the organized as well as collected mass communication information provided about the products or any other object through media. Advertising basically focuses on the group of public rather than considering an individual (Advertising Educational Foundation, 2015). The compensation method involves different models of pricing that are generally used for conducting varied sorts of activities that entail contextual advertising and associate marketing among others. The compensation method of advertising is identified to be different in this modern context as compare to earlier years. In earlier context, the ad agencies played the role of brokers without having any sort of directors as well as copywriters. There lay distinct types of compensation methods of advertising that entail pay- per sale, pay-per lead, pay-per call, pay-per install, pay- per click, pay- per action and pay-per method among others (Belch & Belch, 2003). Therefore, the advertisers are paid based on the above discussed several modes of compensation. Advertising is regarded as the most important media through which people of the society are able to acquire information related to business, jobs and fashion of the current trends. Advertising has been used for many years to provide information to the people residing in different societies. It is also considered as the major activities of business, as it tends to reveal important and relevant information in accordance with the requirements (Belch & Belch, 2003). The charges of past ad agencies were paid based on their respective works such as in the form of commission basis. However, in this modern day context, the charges of ad agencies can be measured based on per call, per action and per sale among others. The cost of advertising has been increased in this contemporary world as compared to the earlier years. In modern trends, advertising is being used to sell goods as well as services by the organisations for the development of their respective businesses (Federal Trade Commission, 2009). The ancient ad agencies did not possessed any executive, therefore, their operational functions were depended on the performance of the advertisers or the workers involved in the process. Due to several changes emerged in this modern business world, the compensation structure of advertising is also noted to be transforming. Nowadays, advertising is used by every organisation with the intention of promoting their respective products and attaining superior competitive position in comparison with others. The compensation method of payment related to advertising is much better based on commission than the services provided by the advertisers. In previous years, there were no directors or any executive to see the quality of the works, therefore, the performance of the same cannot be maintained properly (Federal Trade Commission, 2009). Nonetheless, in this present day context, ad agencies employ executives to observe the quality of the works being performed, resulting in increasing the compensation of advertising at large. It has been witnessed in this present day context that people have become modernized and possessed the knowledge about the importance of advertising. Today, advertising agencies provide different services in a distinct manner as compared to the earlier years that can be made apparent by deriving the market strategies being adopted, analyzing the business development services and also the services of profit sharing. The compensation system of advertising has been improved now than the earlier years, which is projected to improve the quality of life of the people involved in advertising domain. In recent trends, there are several media through which the information related to business along with the products can be easily promoted (Godell, 2010). Research Aims and Objectives The aim of this paper is to identify the trends of compensation of advertising of modern day context as compared to the ancient times. Therefore, to attain this aim, several objectives have been set that are mentioned hereunder. To acquire a greater understanding about the history of compensation of marketing Analyzing the differences prevailing between the ad agency charges of past and modern environment along with depicting examples Assessing the determination of the people related to the charges of ad agency in past and present along with examples Identifying the strengths and lacunas of compensation of advertising Recognizing the possible solutions and the implementation of the same towards the improvement of compensation structure of advertising 2. Ad Agency Charges in the Past and Now Difference between Past and Now Advertising agencies are such organizations that tend to develop advertising campaigns and communicate advertisement messages with the use of different media technologies. Traditionally, it can be apparently observed that charges on advertising were made based on compensation. The compensations related to advertising in ancient times were charged based on the purchase of media space. In the 19th century, the commission based system evolved as an effective measure, which was used as a flexible and enduring manner. This particular system acted as a measure for making payments on advertising works. The payment system based on commission is deemed to be an important medium in accordance with the payments made for advertising services to different advertising agencies. Media and production services are remunerated on the basis of commission for increased flexibility in terms of building short-term relationships. In this respect, compensations are being used for making payments to several advertising agencies. Compensations, in traditional times, were charged based on certain imperative factors that include labor cost depending on the share of agency revenue, expense per employee in relation to mean payroll and costs associated with space along with time. In advertising agencies, the costs were recognized to be labor-intensive based on the projects of the clients, related advertising expenses and salaries (Burton, 2009). With regards to the traditional practice of compensation made by the adverting agencies, it can be found attempts were generally made to ensure that charges relating to advertising were reliable and valid. The commission based system was introduced traditionally for charging advertising services due to reaping certain significant benefits. The commission based system was used for its simplicity owing to the fact that the commission rate is determined based on the services being offered. It is also calculated in an easy and administrative manner. In addition, charges made of commission signify that changes are made in accordance with quality irrespective of services offered. Subsequently, commission is ascertained as a form of payments made in accordance with the results obtained. However, there are certain disadvantages relating to charges that are estimated based on media space, which is identified as an inappropriate medium from the end of digital agencies. In addition, charges calculated on the basis of commission have been disadvantageous for advertising agencies due to the fact that media expenditure is not estimated in accordance with their respective interests (Morrison, 2011). In the present day context, immense change has been witnessed in the field of advertisement due to greater technological advancement and increased level of globalization. Correspondingly, the demands and media service requirements of the clients have raised and also became diversified in terms of quality and accountability. Advertising agencies are needed to provide media services in a variety and extended manner. In this context, the charges made by advertising agencies have also been identified to be modified with time. Currently, charges on advertising services are estimated based on different criteria that include commission, project fees, Payment by Results (PBR) and labor based fees. The labor based fees are the current trend used by advertising agencies in charging fees for the media services being offered to the clients (Arzaghi, Berndt, Davis & Silk, 2010). The following graphical illustration would provide a better insight about the rising trend of fee based compensation as compared to commission based compensation: Fig.1: Domination of Fee based Compensation Source: (Adweek, 2013) Based on the above depicted diagrammatical illustration, it can be affirmed that with the advent of technology, globalization and deregulation, the charges made by advertising agencies are estimated on different factors. These factors relate to different economic drivers in the field of digital advertising as compared to the media and advertising services that were offered in the past. In this respect, the cost of advertising services presently has raised due to the factors encompassing growth in the intensity of labor, development of in-house resources of an agency, complexities between production, agency services and media and development of new functions as well as design of appropriate organizational structures. In this respect, the aforementioned economic drivers contribute in changing the compensation structure of different advertising agencies for the media services provided to the clients. Respectively, the rising demand in creative and media services has increased the need for human capital to a large extent for meeting the diversified advertising service requirements of the clients. Additionally, the development of in-house capabilities of advertising agencies has led towards making considerable changes in the charges made by advertising agencies. Augmented competition due to increased number of advertising agencies has certainly changed the estimation of charges made by them. The cost estimations are often based on certain imperative factors that include duration of a project, team size requirements and technologies needed to employ. These factors are included in cost estimation for charging prices on the interest of advertising agencies. In this regard, in the present day context, advertising agencies charge for managing as well as planning media and fees related to agency as well as production staffing (Burton, 2009). Examples Traditionally, advertising agencies adopted the mechanism of commission for estimating charges on the media services being offered to the clients. In the Asian market, advertising agencies were identified to be using commission process for charging clients for the services offered to them. For instance, Tom Cruise acted as an agency for the client i.e. Paramount Pictures in an advertisement based on certain specific remuneration for the promotion of the movie named MI-2. It can be found that the fee of the actor was US$ 20 million, but he was paid with an amount of US$ 75 million for the success of the movie. This implies an important viewpoint towards the estimation of changes in relation to agency compensation. It is worth mentioning that commission mechanism was adopted for estimating charges by the advertising agencies due to the fact that this mechanism is deemed to be flexible as well as adaptable for different production and media services. Commission mechanism is also determined to be simple in terms of implementation and establishing short-term relationship between clients and agencies (R3 Asia Pacific, n.d.). In the past, commission based system was regarded as an effective procedure based on which advertising agencies have been charging price in return for the media services being offered to the clients. In addition, it has been ascertained that during that time, advertising agencies were involved in charging a commission of certain percentage from the clients. For instance, the most primitive media technologies used for advertisement purposes include TV, newspaper and radio among others. In this regard, advertising agencies charged commission for which the costs of the media industry have been rising due to the inclusion of media bill and production. Media bill represents gross costs that include media rates and agency commission. On the other hand, production bills signify net costs, wherein agency commission is needed to be marked up. During the year 1920, it was found that agency commission was settled at 15 percent by media. This rate implied that the commission level provided to advertising agencies is the settlement made between advertising agencies and media in return of the advertising services being offered to the advertisers by such agencies (1Advertising Age, 2003). In the present day scenario, the commission based system has changed with the fee based system. Since the 20th century, labor based fee system is extensively used with the aim of ascertaining that advertising agencies are compensated appropriately for the media services being delivered to the end users. In this respect, changes in the compensation structure relating to advertising can be witnessed. For instance, advertising agencies charge fee based on the number of hours worked by the employees for conducting different media activities of a client. This fee based system is used by advertising agencies involved in providing multiple advertising services that include professional journals and trade publications among others to a client. The new fee system is identified to develop a correlation between service hours offered and costs associated with agency services. In this respect, fee based system comprises certain costs that include direct labor costs, employee benefit costs, occupancy costs and out-of-pocket costs. For instance, one-third of the advertising agencies in America has used certain fee based system during 1985 and the use of this system has been raised to 68 percent by the year 2000 (2Advertising Age, 2003). In addition, the example of Bartle Bogle Hegarty (BBH) can be taken into concern for discussion, which is using labor-based fee system in the present day context for charging advertising fees. The agency is a renowned advertising agency in the UK, which embraced both commission and fee based system with the aim of managing costs of multiple ads offered to a client. With the increase in the demand of advertisement needs, the commission based system has become irrelevant for managing the costs of media services offered to the clients. In this respect, the fee based system has been a mechanism with the use of which the agencies are able to manage different advertising services, resulting in meeting the needs of the clients as per their expectation levels. The agencies with the use of fee based system are facilitated with the opportunity of expanding businesses and clients’ base efficiently (Deuze, 2011). 3. How Do People Determine Those Charges in the Past and Now Difference between Past and Now It has been earlier mentioned that in the past, advertising agencies were identified to be using the commission based system as a medium of charging fees for media services being delivered to the interested clients. In this similar context, the commission level during that period was ascertained to be around 15 percent. The amount charged with respect to the advertising mediums that include TV and radio among others for placing an advertisement of a client. Thus, the people duly considered the charges made by advertising agencies based on commission rate that are set for each advertisement. The system was majorly used in comparison with other account management systems. In this respect, the cost of advertisements printed or aired in accordance with the requirements of the clients of an agency is estimated based on certain specified rate. Notably, in the US, the rate of commission is primarily structured based on a standard rate of around 15 percent. Contextually, billings of the advertising services were also noted to be charged based on the commission rate. Nonetheless, the people used to estimate advertising services offered in accordance with certain estimations. These estimations are generally made for remitting media technologies used and the agencies using such media for communicating advertisements. The payment is received from the end of the clients and accordingly remitted based on the commission rate to the individuals associated with delivering effective media services to the end users (Shimp & Andrews, 2013). In case of production bill, the commission rate is identified to be amounting up to 17.65 percent. Thus, the people determine the advertising charges based on the commission rate designed in the past (Lee & Johnson, 2012). The advertising agencies in the previous years charged commission for providing media services from two perspectives that include media commission and production commission. Media commission denotes ‘gross’ cost for the advertisements that are placed by media companies as invoices. Contextually, the estimation of charges made for advertising services was based on simple assessment. In relation to an invoice for placing an advertisement, a client pays a definite amount for the advertisement. In this similar context, the invoice made by a client is identified to be including amount for a media company and an agency. An agency is entitled with 15 percent of the invoice as a commission for rendering the advertising services. The remaining amount of the invoice made by a client is remitted to the media company used for broadcasting the advertising services in a printed and aired manner (Lee & Johnson, 2012). With regards to the above context, the media invoices made to a vendor are determined as gross charges, as the 15 percent commission is ascertained to be included for the payment to be made to a vendor or an agency. On the other hand, an advertising agency charge production commissions as per the rate of 17.65 percent. Production commissions are regarded as net charges, as these charges are not included in agency commissions. In this regard, the net charges for the advertising services are added through 17.65 percent for assessing the 15 percent commission, which has been ascertained as gross charges (Lee & Johnson, 2012). In this contemporary world, commission based system is criticized on different grounds relating to less compensation paid to advertising agencies and also regarding the same as a motivational tool for marketing executives. It will be vital to mention that the fee based system is identified to be an effective mechanism based on which commissions are assessed. This system is largely used by different advertising agencies with the aim of ensuring that their desired targets get accomplished within a definite period. Specially mentioning, the fee based system is reckoned to be including certain specific factors for estimating the charges whilst providing quality advertising services. The additional factors that are included in the estimation of the charges include time considered for placing the advertisements, resources needed and output accomplished. In addition, the estimation made on the fee based system can be a combination of the aforementioned factors. People determine the charges to be made for the advertisements on a monthly or fixed time intervals. Clients, charged on the basis of fee based system, are able to acquire better understanding about the expenditures that are limited to the factors considered for the estimation of the charges in return for offering the advertising services (Tripathi, 2007). It can be apparently noted that the above discussed fee based system gets charged based on two particular arrangements that include fixed or straight-fee method and fee-commission combination method. In a fixed-fee method, an agency providing advertising services charges a client on a monthly basis for the services being offered to him/her. In this regard, a mutual agreement is developed between an agency and a client, where an agency is entitled to provide the requested work to a client in exchange for a specific amount to be paid for the same. In case of fee-commission combination, media commissions received by an agency are credited with the fees that are charged. Additionally, at the time when the commissions received are found to be low as compared to the fees, then the differences are to be settled by the clients themselves. These are the different procedures based on which the charges for advertising services are estimated by the people (Belch & Belch, 2008; Tripathi, 2007). Examples Commission based system has been extensively used in the past for estimation owing to the fact that it is a simple and effective method of assessing advertising services charges. This method is a simple procedure based on which people can have a better understanding about the charges made for advertising services. For instance, an agency named Creative Agency is identified to buy a certain space in a magazine for an amount of US$ 150,000 for a client i.e. of XYZ Ltd. In this regard, an invoice made for the advertising services by a client for the due amount, out of which, the agency will remit US$ 127,500 to the media company for having space in the magazine owing to advertising purpose. The remaining amount (150,000 – 127,500) i.e. US$ 22,500 is kept by the agency as a form of commission for the advertising services being provided. The commission realized for the advertising services is determined to be as a fair compensation. This is a simple procedure in accordance with which people are able to determine charges for advertising services in an effective manner (Shimp & Andrews, 2013). In case of production bill, the similar procedure is followed as discussed above, wherein the invoice amount is raised for a client with a rate of around 17.65 percent. For instance, if a production invoice is estimated to be around US$ 5,000, then an agency will gross up the amount based on the commission rate i.e. 15 percent to be realized by the same for the deliverance of advertising services. Thus, the commission realized by an agency amounts to US$ 882. Thus, it can be inferred that the invoice for the advertising service will be charged at US$ 5,882 (Shimp & Andrews, 2013). Presently, people estimate the charges for the advertising services based on fee based system. The below provided diagram will provide a better understanding about the procedure based on which fees can be charged by the advertising agencies. Fig.2: Commission Mechanism Source: (Beekman Associates, 2009) From the above portrayed diagrammatical representation, it can be ascertained that agency compensation is fundamentally based on certain imperative factors that include profit, salaries along with hours and overhead costs. These factors are duly considered for estimating charges in relation to advertising services with the aim of ascertaining that the charges are made in an appropriate manner for the benefit of all involved in the process including the clients, agencies and the media companies. Presently, the advertising agencies generally adopt incentive program as an option for determining the compensation of an agency. This system is used in an extensive manner in the present day context by the advertising agencies who are involved in diverse segments entailing direct marketing, consumer advertising and event marketing among others. Moreover, people determine charges based on this particular system due to the fact that the advertising charges are provided in a transparent as well as fair manner. Salaries and hours are offered by the departments of advertising agencies that are computed in an aggregate form. Overhead comprises certain factors that include indirect labor, corporate expenses and professional fees among others (Beekman Associates, 2009). Thus, the estimation of compensation by an agency based on hourly rate or resources used is ascertained to be an effective procedure in accordance with which remittance of charges is being provided for compensating staff and utilizing the available resources. In addition, people determining charges on advertising services are able to acquire better idea about profit and costs associated with the same. In this respect, fee based system is identified to be an effective procedure based on which a better transparency can be ascertained in terms of profit and expenses from the viewpoints of the clients (Beekman Associates, 2009). 4. Why Ad Agencies Change The Way To Charge Now? Over the years, the approach of ad agencies has changed significantly owing to which the entire sector has experienced a rapid transformation. It is notable that these ad agencies mainly sales products or services that include tangible materials as well as intangible items. However, the primary issues have been highlighted in this particular research study with regards to the format of compensation, which is being practiced in the present day advertising domain (Trehan & Trehan, 2011). Notably, compensation is a particular concept in the domain of marketing, which deals with charging the clients for the services that are being delivered to them. The concept of advertising has changed in this modern world and thus became commercialized in recent times. This aspect has ensured remarkable changes in the way clients or companies are being charged. This section of the research will primarily focus on depicting the manner in which ad agencies charge compensation for the works that they deliver to the clients (Trehan & Trehan, 2011). It has been learned that in previous years, advertising companies work based on commissions that were acquired in exchange to the services delivered to the clients with regards to advertisement. The charges in the past days were duly made for providing space of advertisement within the media sector. It was the level of compensation assured by the clients that certainly resulted into better advertising campaigns (Trehan & Trehan, 2011). However, with certain major loopholes present in the commission system as a form of compensation, changes can be observed in the approach of the ad agencies with regards to the ways they charge. In the present day context, compensation by the ad agencies is mainly charged based on project fees or compensation. It is a particular format of charging compensation that prevails in the contemporary scenario where companies or ad agencies set charges based on the duration and complexity of an advertising project. In this regard, the scale and content of the advertising campaign might also act as an important element that influences the charges to be applied by the ad agencies for the same (Trehan & Trehan, 2011). In relation to the above context, it can be affirmed that service change is also one of the most common forms of charges being applied in the domain of advertising and promotional approaches of the companies. These charges can be set on hourly or daily basis for the clients to whom the promotional services are delivered. There are also certain collective measures that are taken into concern by the ad agencies with respect to the charges that they impose on their respective clients in the contemporary scenario. These collective measures primarily include commission format, service charge format and project fee format in certain scenarios. In this context, it is apparent that there exists numerous ways through which advertisers charge their client with major transformation depicted in this regard from the traditional days of advertising (Trehan & Trehan, 2011). 5. Measures to Set the Compensation: Its Strengths and Lacunas Commission System Commission system to set compensation in advertising domain is noted to be one of the oldest as well as traditional measures. It is important to note that the advertisement agencies set a commission amount of 15%, as per the golden standard rule of the US government (US Securities and Exchange Commission, 1999). In this regard, the agencies pay the remaining 85% of the total price of advertisements to the corporate organisations that desire to promote their products through advertisements. However, from the year 1956, the US Department of Justice had modified the rule indicating that the media agencies must provide services to their respective clients in the nation at the net rate. There exist certain major strengths of commission system that entertain corporate organisations to execute such measures to set compensation. One of such strengths is simplicity as well as easy operations to set compensation in the advertisement agencies. The organizations involved in such operations easily understand and calculate their expected profits (Belch, 2003). However, one of the lacunas associated with this process of compensation also discourages the corporate organisations. This is the controversy associated with the net profit of such measures. It is noted that a few of the media agencies experience higher operational costs, which certainly reduces the profitability and profit level gained from such measures. Nevertheless, the US Department of Justice had mandated all the media agencies to sell the products based on the net profit of the operations (Bidgoli, 2010). Fee Arrangements Another measure involved in setting compensation in advertisements is the fee arrangement procedures. In this regard, the media agencies estimate the total cost that they would incur during the complete process of advertisements. Based on the total cost of the advertisement agencies, these agencies charge fees to the corporate organisations that intend to promote their product offerings through advertisements. However, it can be found that the clients often negotiate with the ad agencies relating to charges imposed on them. Based on the negotiated value, the compensation amount gets fixed (Bidgoli, 2010). Moreover, negotiation also takes place to set a fixed compensation price between the agencies and the owner of the advertisements. In this regard, one of the major strengths that encourage agencies and the other stakeholders to get involved in the advertisement process is the scope of making negotiation amid all the parties involved in measuring the compensation amount. This creates an opportunity of fairness to all the stakeholders involved in the advertisement preparation process to earn desirable profits (Belch, 2003). However, one of the crucial lacunas in this measure of compensation is recognized to be time consumption. Justifiably, as the process encourages negotiation amid all the parties, it is also eminent that the series of negotiation also consume much time for the involvement of all the stakeholders. Eventually, it leads towards causing delay in the process of advertisement production (US Securities and Exchange Commission, 1999). Cost-Plus Agreements Another notable measure to set compensation in advertisement industry is the cost plus agreements. In this regard, the client who prepares the advertisements charges the agencies based on total cost of production of the advertisements with an additional lump sum amount. This additional lump sum amount also indicates the profit margin of the clients. This lump sum profit margin is also negotiated between the clients and the advertisement agencies. This is further negotiated with the advertisement agencies and the owner of the advertisements. It is worth mentioning that this type of compensation through cost plus agreements takes place in industrial products (Bidgoli, 2010). More apparently, it takes place during the introduction of new products in the market. This is so because the determination of advertisement cost of new and industrial products is relatively tougher. The major strength of this form of compensation relating to advertisement is the opportunity to gain relatively higher profit margins. This is because the clients receive an additional profit margin over the cost of production of the advertisements (Belch, 2003). However, one of the lacunas that prevail in this measure of compensation is the uncertainty persisted in the final costs of advertising production. Although the lump sum profit margin of the clients is decided at the initial stages, the determination of the total cost of the agencies is not feasible at the initial stages (US Securities and Exchange Commission, 1999). Incentive-Based Compensation One of the most popular measures of advertisement compensation in the modern day context is the incentive based system. In this form of compensation, the compensated amount is determined based on the quality of works perform by the agencies. In this regard, the agencies receive commission as per the attainment of success in attracting the customers. The success of advertisements is measured through sales value and the market share of the organizations (Bidgoli, 2010). The agencies receive compensation based on the sales value or the market share of the organisations. This might be regarded as the major strength of such measures of compensation, which indicates the effectiveness of the agencies. The agencies attempt to produce high quality advertisements in order to attract the customers. This in turn would enhance the profit of such advisement agencies at large (Belch, 2003). Despite the significant strengths of such measures of compensation, certain loopholes are also persisted in the same. This is the deduction in the expected profit of the agencies, if the advertisement fails completely. In this regard, it will be vital to mention that the sales and the market share of a product not only depends on the quality of advertisements, but also on the quality of the core products and other related factors (US Securities and Exchange Commission, 1999). Percentage Charges The percentage charge to the clients by the agencies is also viewed to be one of the common measures of compensation in advertisements. In this regard, the agencies charge a percentage based on the total production costs of advertisements. The strengths of such form of measures are its simplicity and easy calculation of profit margin (Bidgoli, 2010). Moreover, it also provides reasonable profit to the agencies. However, one of the lacunas in such form of measures is determined to be discouraging profit margin by the portrayal of small and low cost advertisements (US Securities and Exchange Commission, 1999). 6. Possible Solutions and its Implementations From the above analysis, it can be ascertained that there are several key strengths along with weaknesses associated with the compensation structure prevailing in the present day advertising domain. These key strengths and weaknesses are projected to influence the overall operations of advertisement in this contemporary world at large. Notably, in order to deal with the weaknesses or loopholes associated with the compensation structure followed within the advertising domain, several key steps, measures and strategies will need to be taken into concern (Trehan & Trehan, 2011). Identifiably, project fee structure is widely followed as an important part for conducting operations of advertisement in the present day scenario. In order to enhance the fee structure of ad agencies and their approaches, certain specific fee methods of compensation will need to be embraced. These methods may include fixed fee method, speculative fee method and basic fee method among others. As per the fixed fee method, it can be suggested to the advertisement companies that they need to keep the fees fixed for their services on monthly or annual basis. In this regard, the company or the ad agency can charge to the clients based on the services delivered to the clients collectively for the whole month or year. On the other hand, the basic fee method involves a particular process of determining the charges for a particular assignment as per standard industrial norms. This is viewed to be one of the most common measures, which can be adopted by the management of ad agencies to ensure better design of compensation structure (Trehan & Trehan, 2011). With regards to the above context, setting up the compensation structure as per speculative fee method can also be duly considered to be a crucial step in ensuring the conduct of sustainable operations from different advertising companies or agencies in long run. In this particular method of setting compensation, companies charges the clients during ad campaigns based on future trends. This implies that the companies or the ad agencies charge the clients as per the forecasted price that can rise in future within the industry sector. It is one of the extensively used methods within the advertising domain of the world. There are also certain other specific approaches prevailing in advertising domain that can be used by the agencies to set better and effective compensation plan for short along with long term operations. The first measure that can be adopted in this regard is setting well defined policies of compensation. The measures of the ad agencies with regards to setting better compensation structure can also include setting deadlines for receiving the payments from the clients in a timely way. This might enhance the efficacy of the compensation structure by a certain degree. Apart from this, the ad agencies can also adopt the approaches of practicing flexible policies for conducting works in alignment with the changing environment and demands of the clients in the present day context (Trehan & Trehan, 2011). 7. Conclusion Based on the overall analysis, several key factors can be concluded with regards to the topic of the research study. This can further lead towards the accomplishment of the objectives of the research study in a significant manner altogether. This particular research study is focused on determining the importance and trend of compensation and remuneration in the present day advertising domain. It has been learned that advertising is a particular domain, which is prevalent in every section of the present day society. Its inclusion can be particularly seen in the business domain where companies seek to attract potential customers with the help of making better promotional campaigns for reaping several significant benefits. Correspondingly, from the analysis of this particular research study, it can clearly be understood that advertising has become one of the core parts of the operations of the companies operating in various sectors of the world. However, the most important aspect that has been discussed in this particular study is regarding the compensation structure, which is involved in the operations of the ad agencies while dealing with the clients. From the study findings, it has been apparently found that charges impose by the ad agencies to the clients in earlier years were paid based on commission system in return of the services being offered to the clients. However, in course of time this particular aspect has shown significant transformations that one way or the other impacted the overall operations of the ad agencies. The primary objective of the research study was to determine the historical context of the concept of compensation in advertisement. The study also seeked to present a comparative analysis amid compensation structure followed in the past and the one that is used in the contemporary scenario. Correspondingly, the analysis of the research study suggested that in the traditional days, charges with regards to advertisement were set on the basis of compensation. A commission based system was quite prevalent in this context. Charges were made to the clients based on a set commission for a particular assignment. Similar sort of approaches of remuneration were also prevalent within the operations of media and production sector. In both advertising and media sector, remuneration was determined as per commission pay. However, the commission provided by the clients to the agencies was determined based on the factors concerning revenue, expenses and payroll of the agencies among others. Several examples have also been considered in this context to make a better comprehension about advertising compensation. Specially mentioning, in the contemporary advertising industry, compensation is mainly changed based on different projects, set or contracted amounts and work based compensations among others. Hence, it can be concluded that compensation in the domain of advertising has changed extensively in recent years as compared to the traditional times. References 1Advertising Age. (2003). Commission system. Retrieved from http://adage.com/article/adage-encyclopedia/commission-system/98405/ 2Advertising Age. (2003). Fee system. Retrieved from http://adage.com/article/adage-encyclopedia/fee-system/98652/ Adweek. (2013). A look at how agency compensation has changed. 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The United States: John Wiley & Sons. Burton, J. (2009). Understanding the economics of digital compared to traditional advertising and media services. Marketer’s Guide Series, 3-45. Deuze, M. (2011). Managing media work. USA: Sage. Federal Trade Commission. (2009). Guides Concerning the Use of Endorsements and Testimonials in Advertising. Publish, 1-12. Godell, J. (2010). Review of Intellectual Property Law. The John Marshall Law School, 1-27. Lee, M., & Johnson, C. (2012). Principles of advertising: A global perspective. USA: Routledge. Morrison, D. (2011). Agency remuneration. Retrieved from http://www.thegoodpitch.com/wp-content/uploads/2011/09/Remunerationfeb06.pdf R3 Asia Pacific. (n.d.). Agency compensation. Retrieved from http://www.rthree.com/images/articles/Compensation%20and%20Tom.pdf Shimp, T., & Andrews, J. C. (2013). Advertising promotion and other aspects of integrated marketing communications. USA: Cengage Learning. Tripathi, M. N. (2007). How much is your advertising agency worth to you? Journal of Business & Economic Research, 5(12), 25-30. Trehan, M., & Trehan, R. (2011). Advertising and sales management. New Delhi: FK Publications. US Securities and Exchange Commission. (1999). Rule 701 – exempt offerings pursuant to compensatory arrangements. Retrieved from http://www.sec.gov/rules/final/33-7645.htm Read More