: The world's biggest advertiser, Procter & Gamble, is radically changing the way it pays its advertising agencies by changing to performance-based remuneration systems.
As of July 2000, the company will pay agencies based on sales objectives, with agencies being paid more if a brand's sales increase and less if sales decline.
Talking to the New York Times, Robert Wehling, global marketing officer at Procter in Cincinnati, said: "This is the first time in my career we've ever made such a really big, broad-scale change. This is a system that's in our best interests and the best interests of our agencies as we move forward."
P&G has tested the change with seven brands since July, and an announcement of the switch, which will affect some of the world's largest and best-known agencies, is scheduled for today.
Several companies have already replaced the traditional commission system with performance-based compensation. With many choosing to use pre-set, measurable goals like growth in sales, increased awareness of brands to calculate agency payments. P&G's decision is expected to prompt more companies to change to performance-based compensation because of its strength and influence among marketers and agencies.
P&G spends between $5 and $6 billion on worldwide advertising.