P&G to Trim Agency Pay

Client’s Media Consolidation Will Divert Share Of Compensation From Brand Shops to AORs
NEW YORK–The rumblings from Procter & Gamble’s sweeping media consolidations roll on. Starting July 1, the packaged-goods giant will cut compensation rates for its brand roster agencies to reflect the award of media planning duties to two agencies of record. The changes will coincide with the start of P&G’s fiscal year, confirmed Wendy Jacques, a P&G official.
The move is not linked to P&G’s Agency Relationship Renewal project, but instead follows the assignment of all print and network TV buying chores to Leo Burnett in Chicago and TeleVest in New York, respectively. In turn, key media planning decisions–what Jacques termed “tactical planning,” on dayparts and publications, for instance–were shifted from P&G’s lead brand shops to Burnett and TeleVest [Adweek, Nov. 24, 1997]. TeleVest previously handled only media buying.
“We have unbundled that work from the roster agencies,” said Jacques. “We are also unbundling that piece of compensation from the roster agencies and using that to compensate the agency of record. It’s just aligning the compensation with the work they are actually doing.” Jacques said the brand agencies would be paid for developing advertising as well as determining media mix and weights.
The cash flows to its agencies also will be altered, said Jacques. In the past, P&G would pay its brand agencies a percentage of media billings in a lump sum, which sources estimate at around 15 percent. A portion of that amount would then be passed on to the media buying agency. P&G is now paying the AORs directly. The new scheme is likely to mean that brand agency compensation levels will decline a total of 2-2.5 percentage points, estimated sources.
The cuts will hit all seven P&G creative roster shops: D’Arcy Masius Benton & Bowles, N.W. Ayer & Partners, Grey Advertising, Jordan, McGrath, Case & Taylor and Saatchi & Saatchi, all New York; and Chicago’s Leo Burnett and Euro RSCG Tatham. –with staff reports