Mr. Reinhard's public statement of a policy he has been privately pushing created a stir at the event, a luncheon sponsored by the Advertising Club of New York.
The DDB executive has been a staunch proponent of overhauling the way agencies are compensated. Currently, most agencies use a commission-based structure, under which clients are billed anywhere from 5% to 15% of media expenditures.
For several years, Mr. Reinhard has proposed a results-based model. His current campaign to get marketers to "pay for exclusivity" is designed to make up for lost revenue when clients demand an agency not handle conflicting brands, he said.
'CAN'T HAVE IT BOTH WAYS'
In an interview with Advertising Age, Mr. Reinhard said marketers "can't have it both ways." He said clients want to pay lower commissions, such as 6% for traditional advertising and 3% for media, but still expect an agency not to handle rival accounts.
"It's not fair to ask us to lose revenue and not replace it," he said. "Demanding exclusivity in a category may require me to lose millions of dollars in revenues. Let's talk about how we can get that fee back. If you want me to clean out the network [of conflicts], it should cost something."
Mr. Reinhard said paying for exclusivity is a longstanding business guideline at DDB. However, this was the first public disclosure of the practice. He declined to provide details on how much more DDB clients pay for exclusive service. DDB "works with each client based on their needs, brands, goals and objectives," he said.
Mr. Reinhard made his comments during a debate between fellow luncheon panelists WPP Group CEO Martin Sorrell, Jordan McGrath Case & Partners/Euro RSCG Chairman-CEO Pat McGrath and Young & Rubicam Chief Operating Officer Ed Vick.
PROS, CONS OF POLICY CHANGE
Mr. Sorrell favored the loosening of conflict policies, citing Procter & Gamble Co.'s recent move in that direction as a "ray of hope" for the industry. However, Messrs. Vick and McGrath said the relaxation of conflict policies could damage the closeness of client/agency relationships. Mr. Vick likened an agency/client relationship to a marriage, and said that handling conflicting accounts could weaken trust.
"Our ties to our clients would become very, very loose and easily broken," he said.
Yet Mr. Reinhard noted that while agencies are often constricted by client limits, marketers can play the field.
"Clients seem very willing to use more than one agency," he said. If they're splitting their revenue between two agencies, then they're helping my