Have a Coke and . . . Alternative Billing


Many have been contemplating and prognosticating the death of the billable hour for lawyers. I found it interesting to see a similar movement in the advertising industry. (I was unaware that the advertising industry also worked on a billable hour model.)

A story in the latest issue of The Economist points to a movement to pay advertising agencies for value, not hours: Clock-watchers no more. “On April 20th Coca-Cola said it would adopt a ‘value-based’ compensation system for the advertisers that do work for its 400 brands. Rather than paying advertising agencies for hours worked, Coke will pay for results achieved.”

The New Coke model covers an advertising agency’s costs, plus a bonus. The bonus depends on measured results, including overall performance, and the sales and market share of the products being advertised. Coke states that the goal of the program is not to cut costs, but to inspire creativity and efficiency.

I wonder if the legal department at Coca-Cola is following the lead of the advertising department?

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