Of all the things about advertising that most intrigue the curious outsider, apart from the wonderful people who work in it, are its glorious uncertainty and the curious way agencies are paid.
The two are, of course, connected. Since no one can be certain how, or on some occasions if, advertising works, it makes sense of a sort to pay those who work the miracle on some basis other than on results achieved. It matters little that the commission system is historical and dates back to the days when agencies were space brokers acting on behalf of newspapers rather than advertisers. Quirky it may be, but it serves the industry well.
All that looks set to change, thanks to a force so colossal that all bow before it. It has long been the custom in advertising the world over to pay obeisance to the twin deity Procter & Gamble. In the world of advertising and marketing its eternal presence reigns supreme. No one creates, launches and builds better brands; no one knows better how to deliver the promise to the consumer; no one knows more about how to use advertising; no one is more skillful in interpreting the research. The late David Ogilvy, himself something of a god, was so in awe that he said: “My admiration for its advertising principles is boundless…my respect for its acumen knows no bounds.”
But suddenly, from beyond the skies, the wraiths of William Procter the candlemaker and James Gamble the soapmaker have unleashed a thunderbolt. Through the earthly medium of Robert Wehling, the company’s global marketing officer, they have announced: “Effective July 1, 2000, P&G will pay its advertising agencies a percentage of global brand sales, versus today’s commissions based on media spending.”
This is earth-shaking stuff and is made no less so by a form of words that would be quite unknown to the eponymous founders of the Cincinnati business that conquered the world, and remains foreign to literate people to this day: “The new sales-based compensation model aligns agency growth with P&G growth, encourages holistic, media-neutral marketing, and compensates based on global results.”
Put bluntly, in words of few syllables, P&G is going to pay its agencies by results. It is difficult to imagine any prospect better calculated to fill adland with foreboding
and to shut out for ever the sunshine. Payment by results is one of those phrases that tend to command instant assent until subjected to thought lasting more than an instant.
Few organisations, let alone businesses, could long survive if their remuneration were wholly dependent upon their performance. Name me a government that would still be in office, a civil servant still in employment, a lesbian outreach co-ordinator still in work.
True, there are certain areas of human, or rather animal activity, that are the exception. The bloodstock fraternity, for example, deals with breeders on a no-foal-no-fee basis; and lawyers, long accustomed to doing to the public what the stallion does to the mare, have taken to offering their ugly litigation services on no-win-no-fee terms. These, however, are the exception.
In the world of commerce the system is more fallible still. While it might be reasonable to pay, say, an electrician or plasterer by results – if the light goes on when the switch is flicked and the ceiling stays up even when the door is shut quite hard, they get their money – the same cannot hold true for consumer goods. I cannot be alone in having owned a car, which, had its purchase price been deferred subject to the machine being capable of moving in a forward direction for more than a few miles at a time, would have been free of charge.
And how would P&G feel if each packet of Tide, tube of Pringles, or packet of Pampers were to be provided on the condition that payment would be made only if the customer agreed without reservation that her laundry had never been whiter, her taste buds better satisfied, and her baby’s bottom rendered more arid?
Lord Leverhulme’s tiresome old saw, which I make no apologies for repeating here, that he knew half of what he spent on advertising was wasted but he didn’t know which half, holds a grain of truth in which all of marketing may be divined. Advertising must, indeed should, be imprecise and to some extent unpredictable in its results. If its effects were exact, calculable and unfailing, the implications for freedom would be as sinister as its barmier critics maintain.
It is understandable that P&G should wish to steer its agencies away from a tendency to favour traditional media such as TV and print at the expense of other options such as the Internet, but in tying agency compensation to each brand’s total annual sales globally, it is confusing holistic (whatever that might mean) with simplistic. And half its money will still be wasted.
There is, however, no accounting for faith. “We love this change,” comments Pat McGrath, chairman and chief executive officer, Jordan McGrath Case & Partners/EURO RSCG. “It’s all about increasing agency revenues as a result of bigger, better business building ideas and not just bigger media budgets. Hallelujah!”
Praise be! For thine is the kingdom, and the P and the G.