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.
