Monday, April 27, 2009

A new era for Coke and its Communications Agencies

Ad Age today discussed Coke's move towards a "Pay for Performance" approach to marketing services, signaling continued pressure on the old agency/client marketing model.

The agency model of creating a defendable brand position, then guarding that position has been under threat for many years. Consumers are increasingly moving past the ephemera of "branding", and into a place where News, Innovation, Creativity and Excitement are far more important.

With the communications-driven era of branding disappearing, Agencies are looking for new ways to insert themselves into the model. A model where the Brand Manager and product strategy is important than its communications tactics.

Coke has a solution. They are asking their agencies to participate in the total marketing process... And assume some of the business risk. No more guaranteed margins for an "Agency of Record", but costs covered and a success fee if the business makes its numbers.

In theory this is an equitable solution for both client and agency, but it is rare that the marketing has control over the success. In reality strategic planning, portfolio strategy, sales focus, customer marketing, R&D, all have to be aligned before consumer interaction. Agencies will lose more of their leverage as creative is sidelined further.

There is no doubt that a creative resource is required to assist lead marketers on project, but with the success depending on so many disciplines beyond the agency's control, it will be interesting to see who will want to take that risk.

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