Sunday, August 01, 1999

Ad agencies' pay linked to sales, not billings

The Cincinnati Enquirer

        As an incentive to make its new advertising strategy work, Procter & Gamble last month launched a test for paying its ad agencies.

        The company wants to tie the agencies' compensation to brand revenues rather than ad billings.

        Typically, P&G's ad agencies receive a percentage — from 13 percent to 15 percent — of the amount that the nation's second-largest advertiser spends to advertise through them.

        Under the experimental system being tested at all of P&G's ad agencies, the firms receive commissions based on increased sales of the P&G brands they handle instead of straight commissions on ads.

        The tests are intended to reward P&G's ad agencies for good work and increased sales revenue, which would also mean greater profits for the agencies handling P&G accounts.

        “This new approach represents a very liberating departure from the established P&G way of doing things,” said Peter Hubbell, executive vice president of advertising firm N.W. Ayer. “We are convinced that the brass ring is now well within our reach.”


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