Hindustan Unilever Limited (HUL), the country's biggest advertiser, has slashed its media buying agency business margins from 10 per cent to around 5 per cent, reports media werbsite, Televisionpoint.com.
Rahul Welde, vice-president, media, Unilever Asia, told the website, "This model is about paying creative and media agencies for results, not activity. Going forward companies and agencies will have to work on the best possible options in terms of minimising cost and driving good results."
Unlike the earlier system where upfront commissions were guaranteed, ad agencies will have to make do with lower margins if the project does not meet targets.
Unilever also slashed upfront margins with bonuses making up the difference in a move to switch to a 'performance-based' payment scheme.
Unilever is one of the world's largest advertisers and the move means big bucks for advertising agency groups as Unilever's budget in India is huge and estimated at around 18 per cent of the entire ad market.
The company has also reduced its promotional offers on its brands as it focuses on profitability at a time when volume growth has come back.