Unilever has presented its global agency networks with 'take it or
leave it' proposals for overhauling the way they are paid as the fmcg
giant paves the way for a wholesale switch from commission to fees.
The ultimatum was delivered to senior executives of Interpublic and WPP
group agencies last week, the culmination of a series of fruitless
negotiations stretching back nearly a year.
Unilever's chairman Niall Fitzgerald's uncompromising stance is part of
efforts to make roster shops operate more efficiently.
More controversially, Unilever's chiefs want to reflect the fact that
media lies at the heart of their advertising - epitomised by their
communication channel planning strategy - by rebalancing the
remuneration system in favour of media shops rather than creative
Meanwhile, the company is looking to reduce commission payments by
changing the status of some so-called markets, particularly in Asia and
Latin America, from undeveloped to developed, to attract less
'Unilever is a significant contributor to agency profits and anything
which impacts on that will not be palatable,' a senior manager at one
Unilever roster network said. 'This matter isn't resolved.'
The company's initiative is being driven by the much-publicised culling
of its advertising-supported brands and ensuring that marketing
initiatives behind those remaining work harder. Fitzgerald is attempting
to turn the company's static growth into a 6 per cent improvement by
Unilever believes that, with fewer brands on which to concentrate,
roster networks will be able to operate more cost-effectively while
producing better creative work.
Unilever is one of the last bastions of the commission system, which
forms the basis of almost all its remuneration to roster agencies. The
only exceptions are fees for new product development and performance
Now the company wants to retain a system of performance-related
payments, moving away from commission to fees. 'In many ways that's
good,' an agency source said. 'We'll be able to resource business more
effectively and avoid duplication of work.'
Unilever's core global networks are J. Walter Thompson, Ogilvy & Mather,
McCann-Erickson and Lowe Lintas & Partners. DDB joined when Unilever
bought Bestfoods, owner of Knorr and Hellmann's.
Unilever was unavailable for comment as Campaign went to press.