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O&M links payment to client's sales growth

Nina Varghese

CHENNAI, Nov. 7

OGILVY & MATHER Chennai, has put in place a new remuneration system for itself whereby the onus of growth of its client, Wellness Communes, rests on the advertising agency.

Mr R. Krishna Mohan, Executive Director, Ogilvy & Mather (O&M), said that with this client the agency had gone in for a percentage of sales rather than the traditional 15 per cent agency commission.

Wellness Communes is a retirement home project, which is planned near Chennai. The agency gets into the picture early. The enquiries are routed through the agency's CRM system. The leads are then followed up. The agency undertakes to make home calls and will also take the interested parties to the site. Only the really positive leads will be passed on to the client, he said. The remuneration for the agency will be a pre-agreed percentage for every sale made.

Though a lot of heat has been generated about advertising agencies moving towards a fee-based remuneration system, this has been slow to pick up. Another exercise was set in motion by some MNCs, which linked the agency remuneration to actual sales volumes. Advertising pundits at that time argued that since the agency had no control on the distribution and marketing of the product, it was unfair to link the two.

The basic difference, this time, Mr Krishna Mohan said, was that the agency has total control of the entire process right from the concept to design to the advertising and marketing of the project. This kind of control was possible because this was a niche market and would not be possible for a mass-market product like soap or detergent, he said

Besides, the Wellness Communes project, O&M Chennai is also marketing the EcoVillage project in Kodaikanal. There are five sites in the hill station, which are being marketed on the eco-friendly plank.

The agency has switched to the fee-based system with another of its Chennai-based client, CavinKare Ltd, Mr Krishna Mohan said. The monthly payments are a relief as cash comes in regularly, he said. Most clients tend to pay the agency only in the last quarter of the year and this makes it difficult for the agency, he said.

When asked about the shift from the core business of advertising to selling lifestyles, Mr Krishna Mohan said that David Ogilvy, the founder of the agency, always encouraged entrepreneurship with ethics. "We are fulfilling that dictum," he said.

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