Currently, base commission rates operate on two levels, according to executives familiar with the system: In the U.S. and Europe, agencies receive 13% on media billings, and in other parts of the world, they receive 15%. Under certain circumstances -- including when media planning is done locally -- the 13.5% can be reduced to 11.5%.
EURO SHOPS OBJECT
The reduction in commission rates has been particularly chafing to agencies with business in Europe, where media planning is often done locally, but the biggest objections of Unilever agencies have centered on the marketer's refusal to cover expenses for new-product development and to pay decent bonus incentives, said one executive close to Unilever.
Under the new plan, agency time and overhead costs for development work will be covered, said another executive close to the marketer. It is expected this provision will also cover costs of developing work that runs outside traditional, commissionable media.
Unilever Chairman Niall FitzGerald has asked agencies to look beyond traditional advertising in building its brands. Unilever currently spends $6.5 billion a year on marketing.
In the past, agencies were supposed to receive a 1% to 2% bonus for contributing to the superior performance of a product. But one agency executive said the bonus was infrequently paid.
Within the new package, provisions have been made for more frequent payment and the bonus scale itself will now range from 1% to 3%, the executive said.
'SOME CHANGES MADE'
While the plan has not yet been approved by the Unilever executive committee (AA, Nov. 3), it's expected to be approved and go into effect by the first of the year.
"After a year of innumerable meetings," said this executive, "there has been precious little change from the preceding agreement. But some changes have been made that will benefit agencies."
Unilever could not be reached at deadline. Unilever's core agencies include McCann-Erickson Worldwide, J. Walter Thompson Co., Ogilvy & Mather and Ammirati