Procter & Gamble’s roster agencies across the globe are bracing
themselves for a cut in commission levels as part of a massive
belt-tightening programme.
The world’s biggest advertiser is looking at a wide range of options for
changing the way in which its agencies are rewarded - including
abandoning the commission system altogether.
’P&G is clearly signalling a more aggressive time,’ an industry source
said.
The company, which has traditionally adhered to the full 15 per cent
commission rate for agencies, is said to be looking to reduce it by
between 1 and 1.5 per cent after 2000. ’It only needs a drop of a couple
of points to make a big difference to our income,’ a P&G agency manager
said.
The company’s problems became public this week with news of a
confidential memo from Wolfgang Berndt, P&G’s head of European
operations, which appealed to agencies for help in cutting advertising
and marketing costs by at least 5 per cent.
Berndt said: ’Unless we fix our fundamental growth issue, we have no way
to hit our forecasts. We must operate in a crisis mode.’
P&G’s global agency roster includes DMB&B, Saatchi & Saatchi, Grey, Leo
Burnett and Euro RSCG.
The company said it would not comment on speculation or private
memos.
But a senior executive insisted: ’There is no general freeze on capital
investment and new marketing initiatives.’
Nevertheless, P&G bosses are understood to be concerned that the company
has not been courageous enough in its initiatives and has allowed its
bitter rival, Uni-lever, to push ahead. ’It’s driving them crazy,’ a
senior agency executive said.
P&G last month signalled its changing stance when it announced that John
Pepper will stand down as chief executive at the beginning of next year
to be replaced by his deputy, Durk Jager.
Editor’s comment, p29.
