Coca-Cola rewards agencies for truly innovative work
Coca-Cola is extending its value based compensation structure, giving its agencies the opportunity to earn 30% bonus particularly on innovative projects.
According to the article in Ad Age the company is applying a “70-20-10″ rule, meaning a standard performance-based compensation for the 70% of work that agencies are most used to doing. In addition, agencies can take advantage of a guaranteed minimum bonus for the 20% of projects labeled “evolved” or the 10% for projects being tackled for the first time. Plus, there’s the opportunity to earn another 5% of the guaranteed minimum in Coca-Cola’s new agency bonus structure.
What Coca-Cola calls “value-based compensation”, the term that is also commonly used is value pricing. Value pricing gives the agency/developer an opportunity to benefit from adding significant value to the client. Often the agency will charge a small retainer to cover costs, so there is some sharing of risk. For it to work, the the values of the agency and the client need to be in complete alignment.
Digital agency Tectonic has a couple of clients on a performance basis, where they are remunerated based on a percentage of sales. Richard de Nys, Tectonic Founder & Production Director says, “In principle it works well as the upside is good. In practice these projects can be pushed to the bottom of the pile behind clients who pay immediately, when there’s a lot of work on.”
“We consider it on a case by case basis.”
Are there any other compensation models you’ve seen operating in Australia?