Paying for Time or Results?

On April 20, Coca-Cola announced that it was moving to a “value-based” remuneration system for the advertising agencies that work on its 400 brands – a reward based on sales and market share achievement. Procter & Gamble have been running performance related fees for 12 major brands for some time.

This type of remuneration system is also spreading to other service agencies – accountants and lawyers, for example.

Could it work for Sales Promotion Agencies? Wouldn’t a remuneration system based upon achievement of ROI on sales promotions rather than one based on hours worked be better? This would have the benefit of getting clients and agencies working even more closely together – aligning agency compensation with client profitability.