The advertising industry is bracing itself for a difficult year. Optimists predict zero growth but the real day-to-day challenge facing the industry has more to do with the increasing power shift from agencies to client.

As paymasters, clients have always been in a strong position but tighter advertising budgets in 2002 will result in companies demanding an ever-increasing level of accountabilty from their advertising agenices.

It was notable during the many pitches in 2001 (where clients shop around for a new advertising agency) that they were demanding a higher level of strategic planning and an assurance even at that early stage that the agency had a clear knowledge of the client's business.

There will be increased pressure on fees in 2002, particularly in terms of transparency in fee structures but also on the level of fees agencies can charge.

In the early 1990s, agencies were able to charge clients a flat 15 per cent commission for media buying. The current level hovers around 4-5 per cent but last year at least one media account changed hands for a commission fee of 1 per cent and there was talk in the industry - where commission is a highly secretive and sensitive area - of an agency winning a multi-million pound media account by charging a commission of less than 1 per cent. That may be anecdotal but it reflects a nervousness among agencies and has prompted IAPI (the Institute of Advertising Practitioners in Ireland) to consider if there is some way of regulating fee structures.

Clients are becoming more savvy about discounts and are demanding increased transparency. Agencies that clawed back commission from media owners by, for example, getting a 2 per cent discount for early payment are now being requested by clients to pass that discount back to them. While there appears to be little appetite in Ireland for performance-based fee structures - where the fees are based on sales results or researched brand awareness - more clients in 2002 will be using bonuses as agency motivators. This is effectively an agency appraisal whereby a client agrees to pay a bonus on top of the normal fee depending on the agency's level of client service, strategic planning and creative output.

Client demands for ever more measurable forms of marketing communications is prompting agencies to broaden the range of services on offer in their strategic plans to include sophisticated sales promotions and CRM (customer relationship management) activities.

Advertising is a purely reactive industry and most agencies have already responded to the new belt-tightening mood among clients by a round of staff cuts towards the end of last year. More jobs are likely to be lost in the first half of the year as clients' budgetary intentions become clearer. Marketing budgets are normally allocated on a year-on-year basis but agencies are reporting that clients who would normally have made their budgetary intentions clear by now are still holding back on fully committing their advertising budgets further than the middle of the year.