After 'Agency Renewal,' P&G May Modify Conflict Policy
NEW YORK--Procter & Gamble, which is implementing sweeping changes in the way it works with its shops, is now considering loosening its strict agency conflict policy, sources said last week.
If P&G alters its position, the move would spur another round of consolidation among agencies that previously would have been prohibited to merge or be bought by a holding company with competing business.
News of the conflict policy change came last week, after P&G met with the CEOs of its seven roster shops to assess the first-year results of its P&G/Agency Relationship Renewal Project.
That effort is designed to elevate the creative product by eliminating bureaucracy and inefficiencies in the ad development process.
Denis Beausejour, vice president of advertising, worldwide, declared agency renewal "the beginning of a revolution in our cultures that will lead to breakthrough performance."
P&G leaders in Cincinnati have become "more open" to a scenario in which its agencies would be allowed to co-exist with shops that handle rival brands, sources said.
Certain clients, however, such as archrival Unilever, could not co-exist under any circumstances, sources said.
P&G last week issued a three-page statement outlining the progress to date toward agency renewal. It did not specifically address the conflict issue; however, a company representative provided P&G's view.
"Working more effectively with our agency partners to produce business building advertising faster is what agency renewal is about," said P&G's Gretchen Briscoe. "However, if we determine changing our conflict policy will help us deliver that goal, then we'll look at that as well."
Industry experts have predicted that the needs and wants of large marketers will increasingly drive merger and acquisition activity in the ad business. At the PaineWebber Media Conference in December 1997, for example, Omnicom Group president and chief executive officer John Wren said he believed that "in the next round of consolidation, clients will have a greater influence than ever before." Noted Wren, "The client with the biggest influence may be the world's largest marketer, P&G."
Easing up on its conflict policy is a subject that has been anathema to the consumer products giant until now, leaving agencies with iron-clad rules on what accounts they can and cannot handle. A year ago, Bates Worldwide chief executive Michael Bungey expressed relief after the Cordiant "de-merger," saying that his agency could now pursue the 10-15 percent of the global ad spending previously off limits because sister agency, Saatchi & Saatchi, is a big P&G shop.
One source also speculated that several P&G agencies such as Leo Burnett, Grey Advertising, and D'Arcy Masius Benton & Bowles, could band together to create a "P&G holding company," but another executive close to P&G called that idea "far-fetched."
Among its stable of agencies, MacManus Group, the holding company for DMB&B and N.W. Ayer & Partners, and Burnett are close to combining their media units, which some observers believe will lead to a merger.
"There is a new, adventurous breed of Procter manager in place right now in Cincinnati," said one source. Durk Jager and Denis Beausejour are considered more entrepreneurial and open to new ideas than their predecessors.
Jager, who is replacing John Pepper as chief executive, and Beausejour are the driving forces behind some radical changes.
Their new entrepreneurial spirit was evident last week as the client and its agencies hailed improvements made in the past year from agency renewal. P&G also confirmed that alternative media-neutral compensation systems will be tested, starting in January.
P&G also recently instituted a broad restructuring under its Organization 2005 plan that will place its brands under global management teams, with expected agency realignments to follow. [Adweek, Sept. 14].
--with staff reports