P&G, Unilever ax AORs for niche brands

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Procter & Gamble Co.'s Daily Defense shampoo and conditioner is undergoing a major relaunch this month-without an agency of record.

Daily Defense, on the roster of Publicis Groupe's Kaplan Thaler Group, New York, before it was discontinued in the U.S. last year, is now staging a return, but this time it is being handled on a project basis by Barefoot Advertising, Cincinnati.

The move is illustrative of a quiet shift at package-goods powerhouses such as P&G and Unilever. As they reorganize marketing efforts and focus on fewer bigger global brands, they're increasingly dropping agency-of-record assignments in favor of project work for formerly high-profile brands such as Ivory, Finesse and Salon Selectives.

The roster pruning tends to be under the radar and often unnoticed, since neither agencies nor marketers have much reason to trumpet them and the brands aren't the biggest media spenders. But the practice is gathering momentum.

"I think it's definitely a mini-trend unfolding before our eyes," said Arthur Anderson, principal with the consulting firm Morgan Anderson Associates. As a result, he believes agencies eventually "are going to have to change their model, and that's something that agencies to date have been very reluctant to do."

When marketers shift to doing work on a project basis, they tend to use smaller regional agencies, promotion or other marketing-services firms, he said. That's accelerated as the giant marketers moved in recent years from commissions to fee- or incentive-based compensation. But reasons go deeper than that, and consultants expect to see more clients both inside and outside package-goods ditch AORs for smaller or experimental brands in favor of project work with smaller agencies or marketing-services shops.

good and bad

"For agencies caught in a situation where there was a lot of work expected that wasn't commensurate with the compensation, it's probably good news," said David Beals, president-CEO of consulting firm Jones-Lundin Associates. "On the downside, taking assignments on a project basis can be trickier" for agencies used to dedicated staff for predictable AOR accounts, he said. "Sometimes a smaller agency has more flexibility to handle that."

A P&G spokeswoman said dropping AORs isn't related to compensation, but rather to changing needs of the brands involved, which she said "are not using ongoing TV media support that warrants use of one of our global agencies." In addition to the switch of Daily Defense, P&G's Ivory soap and household products, once handled by Grey Global Group's Grey Worldwide, New York, has in recent years done project work with Benchmark, Cincinnati.

Roster pruning has been particularly vigorous at rival Unilever, which in the past two years has quietly ended AOR assignments for Mentadent oral care, Finesse and Salon Selectives hair care and Brut men's fragrance. Unilever said the moves were appropriate for brands that don't require regular TV advertising support.

While compensation may not be the driving factor, it does play a role, said one executive close to P&G. "Under the [P&G] compensation system [AORs] would be paid for doing nothing" on brands without active media support, he said.

Under commissions, brands with no active media support cost clients nothing. Agencies frequently did uncompensated work on new products or lightly supported brands because commissions on a client's other active brands made up the difference, Mr. Beals said. But under fee or incentive structures, every AOR tends to get a retainer or, in P&G's case, a cut of brand sales.

While lack of an AOR once signaled a brand destined for divestiture, such as P&G's Biz in the late 1990s, that's no longer the case. P&G Chairman-CEO A.G. Lafley in a recent investor conference included Daily Defense among "little jewels" in the Clairol deal that have helped P&G enter hair care's fast-growing value segment-even if the current cubic zirconium-priced media budget doesn't include TV.

still supported

Though Unilever dropped Omnicom Group's DDB Worldwide as AOR for Finesse in 2001, it last year supported the brand with a national sponsorship of Sheryl Crow's summer concert tour buttressed by spot radio and a national mall promotion that included computer-simulated hair-style makeovers. WPP Group's Wunderman, Chicago, is the promo shop that did the Finesse campaign. Mentadent and Salon Selectives likewise have had national promotion campaigns since shedding their AORs.

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