Procter & Gamble, the world’s biggest advertiser, is dropping the
The giant household products manufacturer, a long-time advocate of
commission, will ditch it next year and base its rewards to agencies on
how effective their advertising has been in boosting brand sales.
In doing so,P&G is believed to have delivered a knock-out blow to
commission payments and, industry sources say, it will not be long
before other multinational advertisers such as Mars follow suit.
Robert Wehling, P&G’s global marketing officer, described the change as
’big and broad-scale’. But he added: ’This is a system that’s in our
best interests and the best interests of our agencies as we move
P&G is currently testing the new remuneration system on a few selected
brands within its major roster agencies - D’Arcy, Grey and Saatchi &
P&G chiefs want to ensure that there are adequate fail-safe devices to
ensure that no roster network suffers a sudden drop in income.
The strategy is the latest stage in the company’s attempt to get more
creative advertising in order to make up ground lost to its arch-rival,
Last year, P&G, traditionally one of the world’s most conservative
advertisers, relaxed its uncompromising conflict policy in an effort to
widen its choice of agencies. Switching to payment by results is seen as
a way of encouraging agencies to recommend more radical creative
solutions, particularly those involving the use of new media.
Above all, P&G, which spends more than $5.7 billion a year supporting
300 brands across the world, wants to banish agency complacency.
’There’s a belief that under the old system agencies could coin a lot of
money by not actually doing very much,’ a senior executive at a P&G
agency said. ’But if you are a decent agency, the new system could be
Some observers believe P&G’s action could spark a flurry of acquisitions
as roster agencies look to plug any gaps in their communication offering
in order to satisfy their powerful client.