The Economist wrote an interesting article about a week ago, “Clock-watchers no more: A movement to pay advertising agencies for value, not hours, takes off.” Ad agencies have always labored to demonstrate the value they create for a brand, but clients frequently wonder how much that color scheme really worth. Should I have really paid that much for our new logo? What is the ROI?
As the Economist article points out, this anxiety with ROI is changing contracts and business practices. Coca-Cola has switched to a “value-added” model. Twelve Proctor & Gamble brands have followed Coke’s lead. Coca-Cola claims its model covers costs and provides up to a 30% bonus based on results, yet creating accurate metrics for measuring large-scale campaigns is no easy task. Even attempting a “value-added” model is costly and outside the reach of small businesses.
I asked the creative team what they thought about the article and the movement towards “value-based” compensation. Their response? Demonstrating ROI is not a problem for us. We can measure our value-added. Our customers know what they are getting.
For more on how we do it, check back tomorrow.
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