On April 20th at the Association of National Advertisers Financial Management Conference in Phoenix Arizona, Coke took the first steps in trying to initiate an industry-wide movement towards a value-based compensation model.
According to Coke, value-based compensation means that their agencies will no longer be guaranteed a profit. Instead, they will actually have to earn it by creating value. According to Sarah Armstrong, Coke’s director of worldwide media and communication operations, “We need them (agencies) to be profitable and healthy, but they have to earn it through performance.”
Sounds reasonable, doesn't it?
What’s surprising is the response from the ad agency community. To date – little, if any. They haven’t said, "Good idea, Coke." Or, "Go to hell."
Missed opportunity? You bet.
You would have thought that the more creative agencies – Wieden, Goodby, Crispin, TBWA, BBDO – would have come out and said “about time.” After all, they are more then earning their keep every day. And yet, they are still paid on the same model that the less creative agencies get paid.
Hourly time sheets.
Which means, they’re leaving money on the table.
Coke is trying to change the paradigm by suggesting that its agencies be paid based on outcome rather than effort. While many might look at this as penalizing agencies, I see it as offering agencies a way to finally be paid what they are truly worth.
After all, good work should be worth more than bad work.
And, it can be, if Coke started to pay their agencies based on viewer time sheets rather than hourly time sheets.
What’s a viewer time sheet?
Basically, a viewer time sheet consists of digital data that shows how long viewers are engaged in a commercial for. Companies like TiVo, TubeMogul and Visible Measures are now compiling this digital data. The problem is that few have put two and two together and figured out that this digital data actually represents a basis by which agencies can be paid.
If Coke wants to pay based on outcome rather than effort, then paying for how long viewers spend watching a commercial, rather than how long the agency spent working on it, seems to do exactly that.
So how would advertisers go about paying their agencies based on viewer time sheets?
Common sense seems to indicate that the longer the commercial involves the viewer, the better the chance the message has of being communicated. In other words, the better the commercial will have worked for the advertiser.
The better the commercial works for the advertiser, the more the advertiser should be willing to pay the agency that created it.
The opposite, of course, would also hold true.
Sense Bernbach’s days, the creative agency’s lament has always been why can’t good work be worth more than bad work?
Well, now it can.
Which means it's time for creative agencies to stand up and own the value that they so deftly deliver.
And, if they don't, then Coke should tell its agencies that from now on they'll be equating time spent with value delivered. And, that agency compensation will be tied into how much time spent their agencies can create.
Chances are, it will open some doors.
And, for a few agencies, happiness.