Coca Cola Announces Pay for Performance for Market Research

The Coca Cola Company’s vice president of marketing strategy and insights Stan Sthanunathan opened last week’s American Marketing Association Marketing Research Conference with news that he plans to compensate his Market Research agencies on a Pay-For-Performance basis. At least, that’s what was reported in the headlines. What he really talked about was “Value-based Compensation” – a different proposition altogether.

Mr. Sthanunathan made a couple of key observations in an interview with Research Magazine after his remarks:

• Nobody should take profit for granted
• None of his agencies would lose money and some stand to make a lot more
• Defining “performance” in the context of a research project is critical

All good points, but the key to the process is the definition of “performance”. Market research deliverables can be defined simply as “information” . A recipient of information assigns a value to it by answering a few simple questions:

• Is it accurate?
• Is it timely?
• Can I use it to my advantage?

As information providers, we should be held accountable for the answers. As long as the value is defined by these, few should have a problem with being paid based on delivering accurate work on time and with usable insights.

An issue arises when clients try to assign value to effects of market forces beyond the agency’s control. Mr. Sthanunathan ruled out holding agencies accountable for subsequent sales/profits based on their work, since those are often affected by market forces. Will all clients do so? If not, how can research results be tied accurately to sales figures?

Agencies also cannot be subject to the “Bearer of Bad News” syndrome. The value of a research project cannot be determined by whether or not the client agrees with or likes the findings. They are what they are. Assuming that the three criteria above are met, the ultimate monetary value of the project depends on what the client does with the information. But, the agency should be compensated based only on what they delivered, and whether or not it meets the accuracy, timeliness, and utility criteria.

There is nothing wrong, and plenty right, with being accountable for your work.