Something has shifted in how the advertising and marketing industry talks about itself, and it’s long overdue.
Earlier this month, the European Association of Communication Agencies (EACA) convened a briefing for agency leaders built around a new guidance paper from VoxComm, the global alliance of agency associations, titled Redesigning the Agency Value Model. The paper, authored by Brian Kessman of Lodestar Agency Consulting with a foreword by Tim Williams of Ignition Consulting Group, is one of the more honest and actionable documents this industry has produced in years. It names the structural problem clearly: agencies are producing more work, faster, with better tools, and yet margins keep declining, pricing power remains weak, and growth still depends almost entirely on adding headcount.
This is not a “new” problem. Industry leaders on both the agency side, the brand side and consultants on both sides of the aisle have been highlighting this for some time. However, there is away to fix the problem. And Procurement is part of that solution.
The reason is a business model that defines and monetizes value in terms of effort rather than impact. And we cannot blame AI for creating the problem. It is simply stripping away the last defensible rationale for the model that caused it.
What struck me reading the paper, and listening to the discussion it generated among agency leaders and marketing procurement experts, is how much of what it describes I have seen playing out in real negotiations, real contract structures, and real agency relationships for years. The math here is sobering. Revenue per FTE at most agencies hovers around $150,000. At most client organizations, that figure is well above $1 million, at Google it’s $1.3 million, and at Apple, over $2 million¹. The reason for the gap is structural: brand organizations treat people as sources of intellectual capital that can be scaled through technology, IP, and innovation. Agencies treat people as billing units, each capped at roughly 2,000 (often lower) billable hours per year. That imposes an artificial ceiling on both revenue and profit and creates a profound misalignment: what agencies are rewarded for, more hours, is precisely what clients and procurement are incentivized to minimize.
The average creative today produces nearly five times the output they did a decade ago for the same or less per-unit compensation¹. Agency profit margins, which averaged around 30% during advertising’s golden era, now hover around 10% worldwide¹. These are not temporary market conditions. They are the predictable outcome of a broken commercial architecture. As Kessman put it during the briefing: “agencies become penalized for efficiency, and that really works against the conditions that we need to produce great work”.
A framework worth knowing
One of the most useful result of the VoxComm research is a diagnostic framework called the Agency Model Map, which plots agencies across two dimensions: 1) how clearly they define and differentiate their value, and 2) how effectively they monetize it in ways that decouple revenue from labor. The result is four archetypes that describe where most agencies actually sit today, and where they need to go.
Here is a short description to help you better understand how to solve the problem:
Busy by Design: Broad capabilities, custom scopes, growth through utilization. Teams are busy; margins are thin. Every efficiency gain, including AI, lowers perceived value faster than it lowers cost.
Scaling with Strain: Fixed fees have replaced hourly billing, but the economics remain time-based. Offerings are still custom and capability-led. Operational improvement without economic evolution.
Expertly Undervalued: Strong expertise and genuine market credibility, but value is still sold as effort. Pricing remains negotiable, scale depends on senior leaders, and the firm is positioned as an advisor for hire rather than a partner accountable for results.
Distinctly Scalable: Expertise codified into repeatable solutions. Pricing aligned with outcomes. Revenue grows without proportional headcount growth, and AI is embedded as a value driver rather than a cost reducer.
Kessman summarized the ambition simply: “becoming distinctly scalable is the goal, and getting there requires redesigning how value flows through the agency business”.
An interesting insight: when agency leaders self-selected into these archetypes in a live poll during the EACA briefing, the majority placed themselves in the second quadrant, Scaling with Strain. This is a signal that the industry knows and is moving in the right direction but hasn’t yet completed the commercial transformation required.
A tool for Procurement, Not just agencies
What I don’t think has been said loudly enough is that this framework is just as useful for procurement professionals as it is for agency leaders, and arguably more so, because we are the ones impacting and supporting consequential decisions about which agencies to appoint, how to structure remuneration, and what commercial terms to put in place.
Understanding where a current or prospective agency sits on this map changes the nature of the conversation entirely. An agency in the “Busy by Design” quadrant requires a very different governance model than one that is “Distinctly Scalable”. With the former, procurement’s job is largely about scope control, utilization transparency, and rate card management. With the latter, the conversation should be about outcome definition, value metrics, and investment alignment. Applying the same procurement framework to both would be a category error, and one that routinely produces frustration on both sides of the table.
Think about what this means practically. If you are managing a roster of agencies and have never asked each of them where they sit on this map, or formed your own view, you are likely managing each relationship with the same tools. A “Scaling with Strain” agency needs help making the commercial leap, not more Excel templates. An “Expertly Undervalued” agency is probably undercharging you, which sounds like a win until you realize it’s also why their senior talent keeps leaving and their margins are too thin to invest in the people and systems you actually need serving your business.
The framework also helps procurement professionals ask better questions during agency selection. Rather than defaulting to capability audits and rate benchmarking, probe for the things that actually predict commercial health: Does this agency have a point of view on our specific business problem, or a generic credentials deck? Can they articulate what outcomes they’ve produced for comparable clients, with evidence? Do they have repeatable methodologies, or is every engagement built from scratch? Are they pricing for the value of their expertise, or simply marking up their time?
These are not procurement-versus-agency questions. They are alignment questions, and getting them right at the front end of a relationship saves an enormous amount of renegotiation, scope friction, and mutual frustration down the line.
There’s also a real opportunity here for procurement to actively support agencies in the transition toward more value-based models, rather than inadvertently blocking it. Every time procurement insists on an Excel breakdown of hours and rates as the only acceptable input to a fee negotiation, it reinforces the very model the industry is trying to move away from. That doesn’t mean abandoning transparency, it means redefining what transparency looks like. Value-aligned metrics, outcome proof points, and investment-return framing are all more defensible to finance and the C-suite than a staffing plan. Procurement that understands this becomes a genuine enabler of better agency relationships.
What good actually looks like in a pitch
The best procurement professionals I know are not looking for the cheapest agency. They are looking for the agency that makes the business case a clear winner internally, to marketing, to finance, to the C-suite, and to the broader stakeholder community that ultimately has to live with the decision. That’s a fundamentally different brief, and it’s one that opens the door to a much more productive conversation about value.
In the briefing, the discussion quickly turned to what “a great pitch meeting looks like”. While every agency leader in the room took a lot of notes, it is imperative that Procurement also understands what to look for in a great pitch meeting.
Tina Fegent, a marketing procurement expert who contributed to the EACA briefing, put it well when describing what stands out in a credentials presentation: “the agency has a clear point of view on the client’s business problem. It isn’t a list of what they do. They basically reframe the brief, and you know they get it”. That’s the signal procurement is looking for, not a capability inventory, but evidence that the agency has done the intellectual work of understanding the commercial challenge before walking in the door.
Fegent was equally direct about what falls flat: “generic case studies with no outcomes, that’s a red flag. And avoiding the commercial conversation entirely, leaving procurement questions unanswered, or covering it on the last slide”.
RAUS has also sat in enough pitch rooms to confirm this is still the norm rather than the exception. The commercial conversation gets relegated to the final five minutes, after the agency has run out of time to address it properly. How many of us in Procurement have not heard the word: “Sorry, out of time, we will email you the commercial proposal later”. Do not treat anyone who is in the pitch room differently than anyone else. Acklowledge them. Answer their questions.
The second thing that genuinely differentiates agencies in a procurement evaluation is the ability to speak plainly about how they work. In a world where AI is reshaping every delivery model, understanding an agency’s ways of working, its decision-making process, and how data and technology integrate into its approach is no longer a nice-to-have. It is table stakes. Agencies that treat AI as a back-room efficiency tool they don’t discuss publicly are already behind. Agencies that have built it into their client-facing value narrative and can explain what that means for outcomes rather than just timelines, are the ones getting serious consideration.
The structural fix, and why it starts before pricing
The path to value-based compensation does not begin with pricing. It begins with clarity.
Kessman is insistent on this point: “skip straight to the value proposition. Stake a claim. Say these are the problems we solve, these are the outcomes we can repeatedly produce, here’s the proof, and this is how we price”. An agency cannot price for value it hasn’t yet defined, designed, and proven. The sequence matters enormously: identify the specific client problems you are uniquely qualified to solve, translate that expertise into structured repeatable solutions with measurable outcomes, build the delivery systems and proof points to back it up, and only then does the pricing conversation shift in any meaningful way.
My personal favorite is the analogy Kessman used during the briefing, drawn from the paper, is Frank Gehry. He creates buildings that feel wild and unrepeatable, yet runs an extraordinarily disciplined, repeatable process, always on time, always on budget. The point, as Kessman framed it: “it’s not about productizing the output, but rather productizing the outcomes”.The work is different every time. The system that produces it is not. That’s what agencies need to build. And that is what Procurement should be looking for.
The mechanism that unlocks this in practice is a shift from a scope of work to a scope of value. Before the project brief, before the resourcing model, before the fee negotiation, what are the specific outcomes the agency is going to move the needle on? What can the agency actually influence and control? What are the leading indicators of success that the agency’s work directly drives? Name those. Price those. Track those. This is what separates a transactional supplier from a strategic partner, and it’s also what gives procurement something meaningful to bring back to the CFO.
Bringing Procurement into the room earlier
Another sobering poll during the briefing highlighted that most agencies engage with procurement only at the pricing stage, or worse, only at contract renewal. That means the agency has done all the hard work of building a value narrative with the marketing team and then walks into a procurement conversation with someone who has never heard any of it. Kessman identified this directly: “if we go to procurement only at the end, and all they have is an Excel sheet and the idea that hours is what we need to be looking at, well then you’re butting heads. Bring procurement along, give them something else to measure against”. Procurement is probably the best placed to help Agencies define the value in quantifiable outcomes.
Fegent reinforced the point from the procurement side: “best practice is to involve procurement early and in line with the marketing people, not as a final checkpoint”. She’s right, and I would add that procurement has to take ownership of this too. Showing up only at contract renewal and then wondering why the relationship feels transactional is not a supplier problem. It’s a process and ownership problem we created.
The practical implication is straightforward: ask for a seat at the table earlier. Request a meeting with your agency’s senior team, not to renegotiate terms, but to understand how they’re thinking about value, what outcomes they’re tracking, and where they sit on their own commercial evolution. That conversation will tell you more about the health of the relationship than any rate card review.
This also, occasionally, requires agencies to have the discipline to walk away from engagements where the business model is fundamentally misaligned. As Fegent acknowledged: “it takes guts”. But agencies that hold to their value and know what they’re worth will build reputations that attract better clients. Agencies that capitulate on pricing to win work they can’t profitably deliver can end up in the trap of proving the procurement skeptics right, and procurement bears part of the responsibility for creating the conditions that force that choice.
The moment to act is now
AI is accelerating every dynamic described here. The compression of effort-based value is not a future trend, it is happening in real negotiations right now. Clients are watching agencies use AI to produce work faster and immediately asking why fees should remain the same. As Kessman noted: “a value-led model is in the best interest of those who want results and accountability for outcomes, whereas the cost-led model is really only beneficial for those who are looking for a good deal”. If your agency relationship is still structured around the latter, the question is whether that’s the agency’s breakdown, or yours?
The agencies that will thrive are not the ones with the most impressive capability lists or the longest client rosters. They are the ones that have done the uncomfortable internal work of defining precisely what they’re worth, and built the systems, the evidence, and the confidence to defend it.
The EACA and VoxComm have laid out a coherent map for how to get there. Procurement has both the leverage and the responsibility to help agencies make that journey, not by lowering the bar, but by asking better questions, rewarding commercial clarity, and building relationships structured around shared outcomes. The only question is how many agencies, and how many procurement functions, will act on that before AI makes the decision for them.
Thank you to the EACA, VoxComm and Brian at Lodestar for the research and detailed analysis that will enable our industry to move forward at a consequential time in our history.
¹ Source: “Redesigning the Agency Value Model,” VoxComm, March 2026. Authored by Brian Kessman, Lodestar Agency Consulting. Foreword by Tim Williams, Ignition Consulting Group.
Christine Moore is Founder and Managing Partner of RAUS Global Solutions, a marketing procurement advisory specializing in agency governance, contract design, and commercial advisory.