Kraft Foods is reviewing the way it compensates its roster of ad agencies and considering a pay-for-performance structure.
The new payment system would replace the food behemoth's existing one, put in place three years ago when the company consolidated spending at five agencies. That system offers agencies a flat media commission, with no additional creative or production fees. Kraft spent $759 million in measured media in 1999, according to Competitive Media Reporting.
Since the early '90s, Kraft also has had an incentives program that rewards agencies for work that produces results. One executive close to the situation said Kraft's new structure would further "incentivize" agencies that have felt they are unfairly compensated.
"It's an inventive approach, and we view it as very constructive," said an executive close to Kraft.
A Kraft spokeswoman said the study is "part of an ongoing process and no decisions have been made."
The move comes a month after Betsy Holden, formerly exec VP over marketing services, succeeded Robert Eckert as president-CEO. Barbara Ford, VP-advertising services, is overseeing the study with help from an outside consultant.
Kraft's core agencies are FCB Worldwide, J. Walter Thompson Co. and Leo Burnett Co., all Chicago; and New York's Y&R Advertising and Ogilvy & Mather Worldwide.
Contributing: Laura Petrecca.
Copyright June 2000, Crain Communications Inc.