No wonder WPP’s Sir Martin Sorrell is cutting back revenue forecasts, his biggest clients are bluntly telling him, we want the same (or more) for less.
Now Unilever, which makes and markets hundreds of brands including Dove, Surf and Hellman’s, is saying it wants to switch to a ‘performance-based’ payment scheme where it pays a reduced amount for time spent on the business topped up by a bonus if certain performance targets are reached.
This echoes moves already by fellow giants Coca-Cola (not a WPP mainstay) and Procter & Gamble ( WPP agency Grey’s biggest client).
Unilever CEO Paul Polman (a former CFO at Nestle) wants to cut the agreed agency profit margin from ten per cent to five per cent, with bonuses making up the difference (now and then).
As Unilever currently spends $7.5bn a year on advertising you can see the attraction (for him if not his agencies).
Agency remuneration has been a nightmare ever since the media commission system ended with the splitting off of media services from creative agencies some 30 years ago.
Clients of service companies across the world hate paying by the hour, as they still have to do with lawyers and accountants, because everyone knows that it’s an easy system to fiddle.
And, in the case of agencies, who knows how long it takes to generate a good idea?
The trouble is that performance schemes take as long and probably cost as much to devise, administer and agree as actually working on the account.
Unilever also wants to stretch its payment terms beyond 30 days.
Ouch!

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[...] Yet another big name brand has jumped on the Pay-for-Performance or “value based” bandwagon.