Consumer product companies have long felt they pay too much for advertising services, while the ad agencies that supply those services complain they aren’t paid enough.

Inter/Media Cos., an infomercial company in Encino, has what it thinks is a solution: pay for performance, an arrangement in which an agency takes a cut of any sales it helps generate.

That compensation model has worked in direct-response advertising, or infomercials. Now Inter/Media has created a subsidiary to bring techniques that sold household gadgets on late-night TV to mainstream brand advertisers.

The subsidiary, Performant, is based in Boston and its mission is to convince large advertisers in the automotive, consumer goods and financial sectors to try the pay-for-performance approach.

Performant launched earlier this month with five employees. It has signed up three clients, which the company declined to identify, but pay-for-performance ads for those clients will begin airing on TV before the end of the year.

“Pay-for-performance marketing has existed for years, yet large agencies have not yet embraced the techniques and technologies that can deliver truly accountable marketing,” said Anders Ekman, the chief executive of Performant. “Our aim is to bring pay for performance into the mainstream.”

The pay model could save advertisers millions of dollars by cutting down their costs to buy TV time, while a portion of those savings will go to Performant, thus yielding higher profit margins – if the ads are effective, said Robert Yallen, chief executive of Inter/Media.

Inter/Media buys time for infomercials or 60-second commercials in nonprime-time hours, when the costs are much lower than what brand advertisers are accustomed to paying. For the lowest-demand time slots, the agency negotiates a deal so its payments to the broadcaster are linked to sales.

“On average, we are buying media at 20 to 30 cents on the dollar, so you can figure there’s a better return on that dollar,” Yallen said. “Direct marketers have long known a better, more accountable way to buy media and Performant is a way to bring in large clients who might not know about these techniques.”

While the Performant office in Boston will get the business from ad agencies and corporations on the East Coast, most of the hard work will take place at Inter/Media’s headquarters in Encino.

“Performant is built on the shoulders of Inter/Media,” Ekman said.

Inter/Media will buy the time on cable and broadcast TV as well as track the increase in sales. The company has proprietary software that calculates the number of phone calls and sales from every ad.

Major brands have recently began experimenting with direct-response advertising on television, a marketing trend that Performant hopes will help open doors to the spread of pay for performance.

Tom Haire, editor in chief of Santa Ana-based industry magazine Response, said that in the last two years, dozens of brands have moved into direct response. They include Johnson & Johnson, Kodak, Taco Bell, Nokia and InterContinental Hotels. Local names on his list include the Los Angeles Dodgers, 1-800-Dentist, Lions Gate Home Entertainment, TicketMaster and Neutrogena. Overall, Haire estimated that total sales for direct-response advertising is $200 billion this year, a 6 percent increase since 2007.

“Inter/Media specifically has launched this company to take the performance model to larger advertisers who tread the line between direct-response and traditional advertising,” Haire said.

John Barnes, president of Mercury Media, a direct-response agency in Santa Monica, said major brands have recently started producing longer infomercial format ads to compete with established direct-response products. For example, Mercury Media helped Neutrogena launch SkiniD in 2008 to compete against skin cleanser Pro-Activ, the top-selling direct-response product in the country. Pro-Activ is marketed by Guthy-Renker in Santa Monica.

“Pharmaceuticals and credit card companies have been moving into direct response for some time, but now we’re seeing middle-market companies in retail and travel follow the big guys,” Barnes said.

It’s an evolution that bodes well for the pay-for-performance system.

Traditional opposition

The main challenge to get advertisers to adopt the performance-pay model is getting past the advertisers’ traditional ad agencies, who don’t want to see their business threatened, Haire said.

“Often, their main ad agency will tell the advertiser that they can handle direct response, even though it’s a very specialized discipline,” Haire said.

But Inter/Media hopes that Ekman, who previously worked at traditional agencies such as McCann Erickson and Digitas, can find a way to gain access to top corporate marketers and sell them on the performance-pay model.

“My frustration is getting in to see chief marketing officers,” said Inter/Media’s Yallen. “Our hope is that Anders, as a top former executive at general ad agencies, can get in where we couldn’t.”

If pay for performance drives more advertisers to direct-response ads, it could benefit Los Angeles because the county is home to several of the biggest companies in direct-response marketing.

Haire said Inter/Media and Mercury Media are two of the largest media buyers in the country. Production houses Guthy-Renker and Thane Direct in Santa Monica are major players.

“Los Angeles is a hub for direct response,” Barnes said. “A lot of the production and media buying happens right here.”

The county also hosts call centers and shipping companies that handle the orders. The biggest of these include Moulton Logistics Management in Van Nuys and Imagine Fulfillment Services in Torrance.

“For the fulfillment houses that pack and ship the products, L.A. is huge because of access to the ports,” said Haire. “Many of these products are made in China.”

Performant hopes to steer plenty of business to its parent Inter/Media in Encino, but its pay-for-performance model also poses new risks of losing money by choosing a client with poor selling products.

“We will make investments alongside the client,” said Yallen. “It changes the game when you are a risk partner, not just a vendor. With the risk comes the rewards. We will be very selective about who we take on as clients.”