Pay for Performance for Coke’s Ad Agency

Soft drink major, Coca Cola has been trying to push for the pay-for-performance model, where the advertisement agency gets paid on the basis of how well the ads work in the market. If the agency is really able to add value to the Coke products, the agency can earn as high as 30 percent profit.

This value based model that has been adopted by Coca Cola has come to effect since 1996 and has already been tested in several markets like UK, Australia, China, Philippines and Germany. P&G is another company that has already adopted this model in 12 of its brands. It was only time, more company follow this league. Obviously, in amidst of recession, cost cutting measures especially from the marketing end was only anticipated. The key driver behind this decision is not only the recession, but to some extend is the exorbitant spends on the global advertising which sometimes goes as high as $3 billion. Coke is all set to measure the performance of the agencies on factors like the campaign mileage, its importance, the uniqueness of the work etc.

It’s indeed, a tough road ahead for the creative minds. However, advertisement agencies will pull this one off as easily as they have with their creative bent of mind in the past.

Via: Adage