Emirates Business 24/7 reports that Coca-Cola is planning a new formula for payment to its communications agencies, which will be value-based compensation that could lead to their profit margins as high as 30 per cent if their work meets the target figures.

Sarah Armstrong, Coke's Director of worldwide media and communication operations, said "We want our agencies to earn their profitability, but it's not guaranteed," revealing this plan at the Association of National Advertisers Financial Management conference in Phoenix, US.

The company officials clearly indicated their intention of pushing their value-based model as the new policy on global basis. The new policy would also restrict agencies to bill for their contribution long before they deliver their work.

This will be the second policy shift by Coke in the recent past. In five of its markets last year the company has shifted from paying a flat fee to hours worked on the project. Middle East, including the Gulf, is not included in that list of markets. The same was to roll out to 35 more markets covering all of the company's ad- and media-agency relationships all over the world, but with this new transition, the roll up may be put on hold.

Coke conveyed a cautious approach by their agencies but said that questions raised by their communication partners were genuine and were encouraging to reach a conclusive decision.

"There were some pointed questions," Armstrong said. "But our agencies read the trades, and they know what P&G did. They knew at some point someone would take this path; they just didn't know it would be us."

Coke works with a large selection of companies catering to their various sectors. Some of the top names include some of the most creative in the media and agency worlds, such as Wieden & Kennedy, Crispin Porter & Bogusky, Starcom MediaVest Group and Mother, among dozens of others.

Some agency executives, speaking privately, said they could not argue with the theory behind the shift, but had concerns about how it might work in practice.

In the UAE, Coke is serviced by FP7 for advertising and Jiwin for their public relations.

The new compensation system works as follows: Agencies and Coke discuss and evaluate the value of the assignment; Coke guarantees fixed reimbursement and additional profits only after the project is executed and closed; Agency states the profits that it intends to be paid depending on the manned hours spent and creativity used on exclusive basis.