Tuesday, August 31, 2010

Should P&G Change The Way They Pay Their Agencies As Well?

The news out yesterday that P&G is going to change the way they compensate their top managers makes a lot to sense to me.

What makes less sense to me is why they haven’t taken advantage of digital data to change the way they pay their creative agencies.

P&G managers used to be paid based on organic sales growth. Under the new program, P&G managers will be paid based on how well their brands did in comparison to the competitors’ brands in the same category.

So even if the category slows, if the P&G brand in that category did better than the competitor, the P&G brand manager wins.

It’s a performance-based compensation model that takes into account the current economic situation.

So why isn’t P&G taking into account the current digital data situation when it comes to their creative agencies?

We all know that a commercial needs to be watched for it to have any chance of being effective. Digital data can now measure view duration.

If P&G pays for thirty seconds to be produced, I assume that they would prefer to have all thirty seconds viewed.

If the digital data reveals that, on average, only ten of the thirty seconds are viewed, why should P&G pay their agency full fare for failure?

Currently, P&G has a form of performance-based compensation in place with their agencies. This performance is somehow equated to sales. As we all know, sales are a factor of many variables, only one of which is the creative itself.

Why not make the performance of the creative agency tie more directly into what the creative agency actually does - ich is to create interest, involvement and engagement in the commercial?

The longer viewers are engaged in the spot, the more the agency makes. The opposite will also hold true. This type of compensation model is called Sec X Sec Compensation and is now available.

Working under this model would have guaranteed that Wieden+Kennedy received fair compensation for the work they did for Old Spice, a P&G brand. This work created a great amount of time spent with the brand – which in turn – has led to an increase in sales.

My guess is that Wieden+Kennedy did the Old Spice work as part of their retainer. A retainer guarantees that the agency gets paid a set amount, whether the work is brilliant or so-so.

Brilliance should be recognized on its own.

P&G is starting to do that with its managers internally.

The next step is to start to include that type of thinking with its outside suppliers.

1 comment:

  1. Interesting debate, nevertheless I strongly disagree with a reasonable model that can measure how many viewers are interested in a commercial. This simply does not work...or let's put it another way - it would be digital marketing only.

    ReplyDelete