EDITOR’S COMMENT

By STEFANO HATFIELD, campaignlive.co.uk, Friday, 30 October 1998 12:00AM

Procter & Gamble is quietly going about cutting its standard commission rate to 13.5 per cent (more like 11.5 per cent once the payment to the media agency is taken into account). Perhaps the net result is the loss of one percentage point of income. For P&G agencies, that hurts.

Procter & Gamble is quietly going about cutting its standard

commission rate to 13.5 per cent (more like 11.5 per cent once the

payment to the media agency is taken into account). Perhaps the net

result is the loss of one percentage point of income. For P&G agencies,

that hurts.



It’s a further sign of P&G’s new management under Durk Jager playing

hardball with suppliers. It follows the giant media centralisations on

both sides of the Atlantic, as P&G wakes up to its own power,

particularly as the world’s largest buyer of TV airtime.



I believe P&G holds the key to the great shake-up of global agency

groupings, both creative and media, that is already under way. Central

to this is its future policy on conflict, about which it has to date

been entirely inflexible.



Recently, the heads of P&G’s agencies (Grey, Leo Burnett, Saatchi &

Saatchi, DMB&B and Euro RSCG) were summoned to its global HQ in

Cincinnati to be beaten up. The gist of the inquisition was why are we,

P&G, the world’s largest advertiser, not served by the world’s

best/biggest agencies? (I’m not sure how much of a distinction was

made.)



I might answer that question in part on their behalf. The rigidity of

P&G’s own conflict policy deprives its agencies of significant growth

opportunities. What’s more, P&G precludes itself from working with the

Omnicom, IPG and WPP network agencies, not to mention Y&R (which

memorably chose to be a major Colgate agency over being a minor P&G

one).



It’s a state of affairs long accepted, largely - like so many status

quos - because that’s just the way it is and always has been. The

situation surely cannot persist indefinitely.



Media buying gives us a clue about the future. Having consolidated into

what will become StarVest, P&G has a direct interest in that agency

continuing to grow its non-P&G business in order to further add to its

negotiating clout worldwide.



StarVest’s attempt to do so - given the inexorable trend towards

regional and even global consolidations - will inevitably lead to major

conflict issues arising. Traditionally, media agencies have skated

around such problems more successfully than their creative counterparts

- just look at Zenith in the UK.



The reason they’ve been able to do so is that the financial benefit to

the client is immediately clear. Which is the argument that is starting

to hold sway in P&G’s dealings with creative agencies.



If one accepts, too, a movement toward advertising that has greater

emotional involvement with the consumer (and there is evidence of it

already - just look at Fairy Liquid), the question of whether P&G is

with the best agencies at creating that work naturally follows.



To my mind, the knock-on from any moves P&G makes affects not just the

futures of roster agencies (obviously Havas, Saatchis, Zenith and DMB&B)

but others currently looking to make deals (such as True North and

Y&R).



On a more dramatic level, while any potential future P&G dealings look

well-nigh impossible with IPG, is it so inconceivable that they could

take place with WPP or - especially - Omnicom? Whatever P&G does, it

won’t be dull.



This article was first published on campaignlive.co.uk

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