When AI Cuts the Hours, Agencies Need a New Way to Get Paid
AI is reducing the time agencies need to do the work. The commercial relationship now needs to reflect what the agency actually contributes.
AI is reducing the time agencies need for research, adaptation, reporting, production and a lot of routine execution. That creates a very practical commercial question: if the agency is still charging mainly for people and time, who should benefit from those efficiencies?
I think the client should.
If a task genuinely takes less time, the old model cannot keep asking the client to pay for hours that are no longer needed. That is one reason the commercial conversation is already changing. WFA research among multinational marketers shows labour-based models declining while fixed-fee, output-based and performance-linked models are becoming more common, with many respondents also planning further changes in response to AI.
The more interesting opportunity is what replaces the old model.
What are we really paying the agency for?
For years, much of agency pricing started with the resources needed to deliver the work. Scope the assignment, estimate the people and time, add a margin.
Time still matters internally. Agencies need to know what it costs to deliver the work and run a sustainable business. But AI is making time a weaker measure of the value the client receives.
A strong recommendation does not become less valuable because an experienced team reaches it quickly. A weak recommendation does not become more valuable because it took three weeks and a larger team.
The value sits in what the agency contributes to the brand and the business.
That points toward a broader advisory relationship. The agency helps manage the marcom agenda strategically, connects that thinking to the work being delivered and agrees with the client how success will be measured.
Brand and business growth are the ultimate ambition, but an agency cannot claim responsibility for everything that drives them. Pricing, product, distribution, sales, operations and market conditions all matter. So the relationship needs measures that are closer to what marcom can actually influence.
That can include brand equity, brand choice, engagement and sentiment on owned platforms, and regular brand research that shows how the brand is performing in people’s minds and hearts.
The measures will vary by client. The important part is agreeing them before the work starts.
A value relationship needs clear boundaries
Changing from hours to a fixed fee does not automatically make the relationship value-based.
A fixed fee can simply become another way of packaging the same workload if the role, scope and expectations remain unchanged.
The commercial structure needs to be clear.
There should be a fixed fee for agreed deliverables and responsibilities. The scope should have a quantified threshold so both sides understand what is included, with a generous flexibility buffer for the normal changes and additional needs that come with the relationship.
There should also be a client budget provision for work outside that agreed threshold, including additional or ad hoc requirements. Flexibility should not become unlimited scope.
The fee itself should reflect more than the hours required. Brand value, revenue, growth ambitions and the level of responsibility the agency is taking all provide useful context for what the assignment is worth. They should inform the commercial discussion rather than become a formula where a percentage of client revenue automatically determines the fee.
Where both sides are comfortable with it, agreed growth targets may also support a performance-related bonus. That requires care. The agency should only be rewarded for outcomes it can reasonably influence, and the attribution limits need to be clear from the beginning.
This model also asks more from the client.
I have seen situations where a strong brand negotiates the agency down to a low retainer, then expects levels of work, revisions and speed that the fee was never designed to support. Weak briefs create more rounds. Too many people become involved. Decisions take longer. Teams spend time fixing work that should have started with a clearer direction.
A different fee model will struggle if the working relationship stays the same.
The client team has to get stronger too
A serious advisory relationship should also improve the client’s own marcom capability.
That work should sit separately from the day-to-day team delivering campaigns and communications. A dedicated advisory team can look at capability gaps, strengthen the client’s team, improve briefing, clarify ownership and help establish better ways of making decisions.
That matters because agency performance depends on the environment around the work as well as the agency itself. The same WFA research found briefing quality, respect and trust, and high-quality feedback ranking ahead of financial incentives as contributors to agency performance.
A stronger client team should lead to better briefs, fewer unnecessary revisions and clearer decisions. It should also give senior agency people more room to focus on the work where their experience has the greatest value.
Start where the relationship can support it
I would not expect the industry to change its commercial model across every client overnight.
The more practical starting point is a small number of relationships where both sides have enough value at stake and enough trust to work differently.
Choose clients with meaningful brands, clear growth ambitions and a willingness to define success properly. Match them with agencies that can contribute beyond execution. Agree the scope, threshold, flexibility buffer, extra-work provision and shared measures from the start.
Then prove the model.
If it creates better work, a better client relationship and a healthier commercial outcome for both sides, expand it.
The client should benefit when technology genuinely reduces effort and cost. The agency should be paid fairly for the value and responsibility it brings. Both sides need clear boundaries and a shared understanding of what success means.
What exactly are we paying the agency for?
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Habib Rihana is the founder of Short Pencils, an independent marcom advisory helping leadership teams, CMOs, founders, boards, and agencies make stronger marketing and communications decisions across the Levant and GCC.
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