Procter & Gamble’s global agencies are used to having the
frighteners put on them periodically. So is there any reason for them to
get in a fluster over the latest doom-laden warnings from the world’s
biggest advertiser?
The comforting answer is that this is no more than a shaking of the tree
by P&G’s new regime led by Durk Jager, its incoming chief executive.
Indeed, the leaked memo from Wolfgang Berndt, P&G’s head of European
operations, calling for a cut of at least 5 per cent in advertising and
marketing costs, may be a politically expedient gesture. Better to show
he is grappling with costs before Cincinatti tells him he must.
A less comforting scenario is that P&G is demanding much more from
agencies in return for its unswerving loyalty to help transform a less
than glittering recent performance.
P&G has displayed uncharacteristic timidity over new-product development
of late. While Unilever, its greatest rival, has pushed boldly ahead
with new-product launches, P&G confines itself to limited trials, often
losing any technological advantage it might have gained. Attempts to
lift sales by 7 per cent a year failed lamentably. It managed a rise of
just 1 per cent in 1997.
Jager ushers in a much tougher and ruthless approach. P&G agencies have
long benefitted from the company’s steadfast adherence to the full 15
per cent commission level. But they may find incomes dropping
substantially as the big-volume client flexes its muscles to drive
levels down.
And who would bet against it relaxing its rigid conflict policy in a
quest to find the best advertising solutions. The P&G milch cow is
starting to kick - and agencies had better keep their heads down.
