Last week one of Britain’s biggest advertisers spent about pounds
400,000 on a press campaign with a very unusual message: ’Our products
haven’t changed, and we’re not going to cut our prices,’ Ford
’But, er, we might if our rivals do, in which case we’ll refund the
difference to customers who buy now.’ As come-ons go, this is pretty
In fact, it’s an invitation not to buy a Ford.
I mention this not to berate Ford, which has found itself trapped in a
situation only partly of its own making, but as an illustration of the
complexity which surrounds the whole issue of paying agencies by
Were Ford, say, to emulate Procter & Gamble (Campaign, last week) and
pay Young & Rubicam, Ogilvy & Mather or J. Walter Thompson by a formula
linked to sales volumes or profits, you can imagine everybody at the
agency and the client scratching their heads and wondering how they sort
this particular mess out.
This magazine has long argued that the commission payment system is a
blunt instrument long past its sell-by date. To replace it we’ve
advocated a move to payment by fees or results, not least because it
encourages agencies to recommend the best possible solution - not one
that suits their agenda. If the rest of the industry follows the lead
set by P&G, a lightning rod for other agencies and clients, so much the
better. But at the same time, we’ve always realised that payment by
results is neither easy to implement nor suitable in all cases.
Ford is just one example of how it could go wrong. But take the case of
Egg, the Pru’s e-bank. The ads pulled in so many depositors that Egg had
to turn them away for fear of losses running out of control. Success or
failure? And how much was due to the advertising and how much to the
attractive (excessively so, many would say) initial rates Egg was
offering to depositors?
As any advertiser knows, there are many other factors which may come
into play: bad weather, disputes, delays, supplier problems, government
regulation or a competitor cutting prices. Many of these are beyond the
control of the client, let alone the agency. All they can do is react -
which means that any system of payment by results depends, if it is to
be fair to both parties, on a continuous moving of the goal posts.
There’s nothing wrong with this, and nor is it impossible. But building
a model agreement capable of withstanding all these potential outside
shocks to the system is difficult - so difficult that probably only the
biggest and most sophisticated advertisers will be able to do it.
Nonetheless, there is one potential benefit which we should
Moving away from commission ought to strengthen the long-term
relationship between marketing directors and their agency. That’s
because such a system only works if the client is as fully engaged with
the advertising as the agency is with the client - which, let’s be
honest, they often aren’t.
For once, however, the interests of the agency and the client should be
so closely aligned they are as one. And that is real progress.