Coke is not it.
We all know the current model of agency compensation – get paid for hours worked – is broken. It doesn’t differentiate when agencies come up with good ideas or bad ones, and it actually encourages agencies to waste time or bill for hours that weren’t even worked. Plenty of shop and client have tried various new models, but nothing has really stuck. But now Coca-Cola has come out with a performance based model that they’re going to use with their agencies going forward. Until AdAge makes it subscriber-only, read this article about it. There’s also this shorter one.
But let me give you the Cliff’s Notes version: It’s a terrible, terrible idea.
Coke wants to set target goals for every campaign and let agencies earn anywhere from zero profit (just covering expenses) to 30% profit if the targets are hit. Sarah Armstrong, Coca-Cola’s director of worldwide media and communication operations, argued that “we want our agencies to earn their profitability, but it’s not guaranteed. We need them to be profitable and healthy, but they have to earn it through performance.”
Doesn’t anyone else see the gaping holes in this harebrained idea?
First, where’s Coca-Cola’s culpability in all this? Last time I checked, they were approving everything their agencies do. They have hundreds of marketing middle managers who say yes or no to what ultimately goes out the door. With this new compensation model, Coke is basically saying “If it works, great. If not, it’s your fault not ours.” Bullshit, bullshit, bullshit.
And secondly, and by far most importantly, is that Coke is now compensating agencies based on factors the agencies aren’t in control of. As I mentioned above, Coke has the final say on everything – which concept is chosen, what it says and looks like, where it runs, how much it runs, etc., etc., etc. Why should an agency be penalized because your frightened mid-level marketing manager decided to whittle a great concept down to the lowest common denominator? I mean, we all know agency floors are littered with great ideas the client was either too stupid or too afraid to choose. And we’ve all seen them go round after round, sanding down something original until it’s an amorphous blob that looks like everything else.
Does this new way of paying agencies mean that Coke will have zero say in what gets produced? If I’m a Coke roster agency and present great work but what Coke approves doesn’t meet the goals and I don’t make any profit? Well, you can guess how long that relationship will last.
What if Coke suddenly decides to change formulation and sales drop – guess what? The agency makes less. What if they screw with their packaging and sales drop? Or Wal-Mart decides not to carry them any more? In all those situations, the agency gets screwed because of bad business decisions on the part of the client. Now tell me, if Ford or Citibank adopt this “value pricing” would any agency trust them not to screw it up?
This just screams of clients panicking and trying to get more for less in today’s economy. It’s Coke putting a gun to the heads of its desperate roster shops and forcing them to take a deal that is so one sided as to be ridiculous. Here’s hoping that every Coke agency refuses.
Filed under: Are you kidding me?, Commentary | 4 Comments
Tags: advertising, Commentary, compensation, ridiculous
Pretty fascinating idea on Coke’s part. A lot like messing with the formula, and you know where that got them. I agree with you. Too many variables the agency doesn’t control to make this viable, or at least fair, from the agency’s perspective. But I’m sure in these kinds of times, most agencies will play along. Though even great creative will have a hard time moving the needle on sales, as the Cokes and Pepsis of the world are pretty established and I don’t see large- or even medium-scale movement of customers from one to the other. Maybe incremental sales, but it seems like a losing proposition for agencies, and further commoditizes what we do. Ads R Us.
Yipes…that sounds like a terrible idea. It’s hard enough battling scope creep and tight timelines as it is! I am going to wager a guess that the agencies who play along create some headway at first, but end up being screwed in the end because, to put it bluntly, they’ll find they’re sitting in the bitch seat (if they weren’t sitting there already.)
You bring up very valid points. An agency’s work is only as good as the client allows it to be. If they set these standards but only approve very safe work, the results will never be impressive enough to warrant a big payout.
This also wreaks of loopholes for Coke.
“Yes sales were up thirty percent but awarenes and um…prefernce dropped so you don’t get paid. Yeah that’s it. Sorry”