P&G Pilots New Agency Model for a Digital Age

Marketer Wants Single Point of Contact for Each Brand Across Disciplines

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BATAVIA, Ohio (AdAge.com) -- It sure seemed that Procter & Gamble was well-armed for the digital uprising -- the war in the store and any other marketing revolution, for that matter -- given its forward-thinking, media-neutral agency compensation introduced seven years ago. But as it turned out, the system designed to encourage change ended up rewarding shops that stayed focused on TV and actually made it costlier to switch to new media.

So now P&G is testing a system that essentially designates one agency as a "single point of contact" on each brand -- and sounds an awful lot like the old full-service agency model the marketer, and most agency holding companies, dismantled more than a decade ago in favor of agency specialization. P&G says it's testing ways to change its agency model to improve collaboration and marketing plans while reducing the number of transactions for its brands and marketers.

This being P&G, it goes without saying that the move to simplify how it deals with marketing-services agencies is a complicated process, starting with a four-part pilot test.

Here's how it works: The test involves each of P&G's major agency holding companies -- Publicis Groupe, WPP Group and Omnicom Group -- along with independent Wieden & Kennedy. Each has become the "single point of contact" for one brand.

Homework is on the board
Most of the tests involve new assignments announced in the past year, except for a previously unannounced expanded role for WPP's Grey Global Group on Pringles. The other tests involve Publicis Worldwide's holding-company assignment to handle Oral B, launched earlier this year; Wieden's recently expanded assignment with Old Spice; and Omnicom's Integer Group, named to lead a holding-companywide assignment for Eukanuba.

Two of the pilots -- the Publicis-Oral B account and the WPP-Pringles account -- include testing changes to P&G's seven-year-old sales-based compensation system by expanding it to marketing-services shops other than traditional ad agencies. It also rolls up payments to all shops into a single payment (though, in the case of Oral B, WPP design shop Landor Group is carved out of the single-payment system).

The tests aim to simplify a structure in which a single brand and its marketers may work with more than a dozen media, advertising, promotion and design shops in the U.S. alone. It doesn't, however, necessarily mean consolidating all disciplines within a single agency or even within a single holding company, a P&G spokeswoman said.

At the same time, P&G is moving to simplify its internal management of agencies and brands. Earlier this month, it designated 14 general managers as "brand franchise leaders" over the company's largest global brands. The idea, a spokeswoman said, is for P&G to have a single point of contact for agencies analogous to the single point of contact on the agency side.

No clear timeline
The moves culminate several years of work under Global Marketing Officer Jim Stengel and Global Strategic Relationship Optimization Manager Kim Kraus, though it's not clear how or how soon the agency-structure changes will be adopted companywide.

The soonest most P&G brands could make wholesale changes likely would be the start of the next fiscal year, in July, and the spokeswoman said changes would be adopted on a brand-by-brand basis, rather than through a single companywide shift. She said the moves aim to foster better collaboration and reduce the number of transactions involved in an increasingly complex marketing mix.

One person close to the company said the pilot tests are most likely a way to address problems with the sales-based compensation system, which hasn't always worked as intended in to encourage "holistic" marketing plans.

The goal of the system, adopted under former Global Marketing Officer Bob Wehling, was to make P&G's agency compensation more "media neutral" by no longer basing it on media commissions.

Cost savings
The reality, however, has been that P&G's agencies generally haven't developed internal digital or promotion capabilities, so P&G brands pay separate fees for those. And in some cases, when a brand's marketers want to decrease or eliminate use of TV or other traditional media in favor of digital or shopper marketing, they can end up paying an ad agency as much as ever to do much less work, even as they pay more in fees to specialty shops.

Though it's possible to change agency compensation, that can take a year or more. For a brand manager whose tenure on a brand may be no more than a year or two, the easier decision may be to stick with TV.

But under a single agency point of contact -- combined with a single-payment system -- P&G brands no longer would be financially penalized for changing their marketing mix. It would be up to the lead agency to budget and pay for the work of all disciplines out of a preset global budget.

More work for sibling shops
Another effect of the single-point system could be lead agencies attempting to shift more work to their sibling digital, media and promotion shops -- a possibility certainly envisioned last week by P&G roster shop Leo Burnett Co., which organized an entity that bundles its services with Publicis siblings in those disciplines.

Few P&G brands have assignments aligned along holding-company lines. Some have marketing-services rosters encompassing three holding companies and several independents in the U.S. alone.

But the P&G spokeswoman said agency assignments still will be made by the company, not the lead agencies, regardless of what model brands adopt. "P&G will be the decision maker," she said. P&G has yet to assign any brands to the newly consolidated Leo Burnett unit, she said.
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