Final answer:
Dynamic Inc.'s compensation system is tied to the sales and market share performance it achieves for its clients, defining it as a value-based compensation system. This model incentivizes the agency's success by aligning its earnings with its clients' results.
Step-by-step explanation:
Dynamic Inc., an advertising agency in Manhattan, has a compensation system where it receives payment based on its success in increasing its clients' sales and market share. The nature of this compensation plan aligns with a value-based structure. In a value-based compensation system, the agency's fees are directly linked to the real-world results produced for their clients. This contrasts with fixed-fee, where the agency charges a predetermined amount regardless of performance, or cost-plus, where the agency charges a fee on top of costs.
By utilizing a value-based compensation model, Dynamic Inc.'s earnings are intricately connected with the level of success it achieves on behalf of the clients it serves. This structure encourages the agency to consistently perform at peak levels, ensuring that their interests are aligned with their clients' objectives.
Therefore, the final answer to the student's question is: C. value-based. This compensation model incentivizes Dynamic Inc. to strive for higher sales and market share performance for its clients, which can in turn positively influence its revenues.