Industry Reacts to P&G Preferred Vendor Proposal

By Jeff Beer Published on .

A recent move by Procter & Gamble to create production efficiencies by limiting agencies' choice of production partners has provoked a backlash from many top-level production players. The marketer is working to create a shortlist of production companies its brand agencies must work with, cutting the number from last year's total of around 125 down to a list closer to 30.

The move is said to be part of a company goal to develop a set rate card for production costs for the next two years. Production companies that agree to these terms will be given "preferred vendor" status but not guaranteed a set amount of work.

According to agency sources, the marketer asked its agency partners to generate a long list of around 170 preferred production companies. Agencies then voted on those companies to arrive at a list of 75 companies that P&G approached with an RFP. Commercial production companies had until July 2nd to decide whether or not to participate. Sources say the RFP included requests for production company income and financial info and a disclaimer that P&G might share info with agencies and cost consultants. Matt Miller, president and CEO of the Association of Independent Commercial Producers (AICP) says that providing detailed financial information up front to the marketer, who is then, presumably, at liberty to share that information with agencies, creates complications for agency-production company relationships. "Now you have these P&G terms that the agency knows about," he says. "So then how do (production companies) work with other clients with that agency? It gets fairly complicated." Said another agency source, "I expect to be getting calls (from other marketers) about this."

Classic P&G
Classic P&G
Based on the information requested and the nature of the proposed arrangement that sources have described variously as "absurd," "ridiculous," and "short-sighted," many A-list production company executive producers are skeptical about just how many companies will agree to participate. Based on initial feedback from the production community, it appears that several top tier companies have declined the invitation. In terms of Procter's agencies' reaction, one producer sums up: "They know we are all seriously opposed to this concept."

Producers from both camps says that guaranteeing certain rates for at least two years is unrealistic. The nature of union and other labor agreements, for example, makes it difficult to set rates that far into the future. Some industry sources speculate that agencies might be forced to work with non-union companies and non-DGA directors to comply with P&G's new rules.

Said one source, "You can't treat production like we're making a shampoo bottle. It's never the same. It's not like we always know exactly how much plastic we need, how much this, how much that. It's never the same thing for production. So to assume you can get a cost for a camera or stage or whatever that's going to be the same price for every shoot doesn't make any sense. This is not how you save money, that's how absurd all this is. It's nickel and dime."

Because the P&G proposal doesn't guarantee the production companies any work, it doesn't provide any leverage for the discounts the marketer is looking for, and agency and production players say the proposed deal will do more to dampen creativity than decrease the marketer's costs.

"If Nike calls me up, which probably does one-tenth the advertising of P&G, I'm more likely to give Nike a deal despite the lower volume because they do better work," says one production company exec. "I don't sell products, I sell directors. So my product's only viable if they do good work. Why am I going to give someone a deal for work that's not going to do anything for my reel or my brand? It would just be for the money, and if it's just for the money, why am I giving them a big discount?"

Another executive producer says it will be interesting to see how agency creatives react to having their creative choices tied to such an agreement. "I'm worried a bit about some of the softer results of this," says one senior agency producer. "For example, a creative team saying I don't want to work on Procter because I don't want to be limited in terms of who I work with." "

Miller asserts that there are other, perhaps more productive ways to pursue production efficiencies. "They're not bringing any new thinking to the question of what would be of value to a production company in order to bring us better efficiencies," he says. "There actually might be items of value there that they (production companies) could offer. For example, there could be a guaranteed number of days of shooting, or a guaranteed cash flow. That's a big issue, as we've seen with the sequential liability issue. Maybe there is a way of saying, if we'll guarantee you payment on X dates, what would your costs be? That would be smart way to get efficiencies. Instead they are saying everything is the same but you have to be on our preferred vendor list to do any work."

P&G will reportedly take until September to review the RFP responses. Sources say that the initiative allows an "escape clause," allowing agencies to work with non-preferred vendors on rare occasions, but the parameters of that clause have not been spelled out.

At least one executive producer hopes the commercial production industry's response will make the marketer think twice about instituting the new policy. "When you're in a world blasted with so much imagery and you need to stand out to make a difference, you want to get the most talented, most creative people to make your stuff stand out. The way to do that is not to bully their creative choices or create a shallower talent pool."
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