P&G’s New Compensation Plan Gets 2 Cheers

Agencies Generally Favor Long-Awaited ‘Media-Neutral’ System
NEW YORK–Procter & Gamble’s shift toward compensating agencies based on sales results–rather than on billings–was generally applauded by roster agencies and observers last week, even though the move was a long time coming.
“It’s going to motivate us more to sell products,” said Pat McGrath, chairman and CEO of Jordan McGrath Case & Partners/Euro RSCG, which handles three P&G brands. “That’s our job, isn’t it?”
P&G’s global marketing officer, Bob Wehling, said the new system would encourage “holistic, media-neutral marketing,” and agencies would be compensated based on “global results.” The plan will be implemented by July.
Arthur Selkowitz, chairman and CEO of fellow P&G agency D’Arcy Masius Benton & Bowles, said, “It will spur creative departments to think in a wider scope, to think outside the television box.” TV, the most expensive ad medium–is the preferred vehicle of agencies being paid commissions on billings.
Overall, the new system is “extremely fair and motivating,” said Roger Haupt, incoming president and CEO of The Leo Group, parent of another roster shop, Leo Burnett.
Another benefit: agencies expect P&G’s creative approval process, which has quickened in the past two years, to move even faster.
Other ad giants, such as Kellogg’s, General Motors and Ford, have already shifted from commission systems. “P&G is among the last to still use 15 percent commissions–probably only 8 percent of the majors still do it,” said Arthur Anderson, of Morgan Anderson Consulting in New York.
The change is part of P&G’s agency renewal project that began in 1997 and is intended to make P&G’s advertising more effective and streamline the development process.
The downside for agencies, of course, is when sales head south. “Advertising is only one of many elements in the marketing mix,” said Tina Georgeou, president of DeWitt Media in New York. “It’s hard to isolate which one is not contributing.”
One agency executive noted that as most P&G brands require a mass audience, agencies might find themselves doing more TV and not less. “The Internet and direct mail are [only] good for select marketing,” whereas TV delivers the numbers.
And then there were the outright cynics: “Too bad people can’t be self-motivated to market a product properly without this pressure,” said one.
–with Aaron Baar and John Consoli