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Coca-Cola, HUL link ad agency payments to the sales fizz

Forget the Cannes you win, just count the cans you sell — that’s what the world’s largest beverages company Coca-Cola seems to be telling its advertising agencies as it kicks in a result-based payment system.

In an unprecedented move that may change the face of the Rs 21,000-crore Indian advertising industry, top advertisers such as Coca-Cola India and Hindustan Unilever are set to link compensation of their media buying and creative agencies to the performance of brands, company officials said.

A performance-linked remuneration system, officials at some of these companies hope, will ensure the advertisement makers will be more concerned about relating the product to consumers than about winning prestigious awards at Cannes. Coca-Cola India has already started implementing a system, where part of the payment is linked to performance, with its media-buying agency Madison, which will be extended to creative agencies McCann-Erickson, O&M and Leo Burnett next year.

“This model is about paying agencies for results, not activity,” a Coca-Cola India spokesman said.

India’s advertiser No 1, consumer product company Hindustan Unilever (HUL), which is faced with eroding market share, plans to introduce a similar system to demand more bang for its buck from its advertising agencies, said company insiders who refused to go on record.

HUL’s biggest rival Procter & Gamble (P&G) too is globally expanding a system where its agency gets a pre-set annual fee, plus incentives calculated on the basis of sales and performance.

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