P&G Ad Agency Compensation Plan Is Based On Global Sales
This article was originally published in The Tan Sheet
Executive Summary
Procter & Gamble will compensate ad agencies based on a percentage of annual global brand sales under a new plan announced Sept. 15. The program, designed to "reward top-line sales growth," is slated to begin July 1.
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Procter & Gamble will compensate ad agencies based on a percentage of annual global brand sales under a new plan announced Sept. 15. The program, designed to "reward top-line sales growth," is slated to begin July 1. Traditionally, P&G has paid commissions to ad agencies based on levels of media spending. Under the sales-based compensation model, the company will apply resources to projects that have the greatest potential for strengthening the business. This approach, in turn, will "align agency growth with P&G growth, encourage holistic, media-neutral marketing and compensate based on global results," the firm explained. P&G worked with its ad partners in a "collaborative effort" to develop the revamped plan. According to Grey Advertising (New York City), the global agency of record for P&G's Clearasil acne franchise, "the old system has its inherent flaws - plans tend to favor TV and print to the exclusion of the Internet, direct mail and other options." Under the new compensation plan, "our rewards will be based not on which media we used but on successful business-building ideas and programs," the agency continued. New York City-based Saatchi & Saatchi, which handles the Oil of Olay cosmetics brand, also noted its approval of the move. "This change in the way we are compensated reinforces our shared commitment to increase P&G sales growth and helps stimulate the continued growth of their agency partners." Under the existing system, agencies receive compensation based on a "straight percentage of total media spending....This leads to marketing plans that are heavily skewed toward traditional media," Saatchi & Saatchi maintained. The compensation program is in line with Procter & Gamble's Organization 2005 program, which is designed to maximize resources on a global level (1 (Also see "P&G's Byrnes To Head Health Care & Corporate New Ventures Unit" - Pink Sheet, 14 Sep, 1998.)). "This new structure empowers us to align our talent and resources, break down geographic barriers and focus on global growth of P&G's brands," D'Arcy, Masius, Benton & Bowles (Los Angeles) said. |