The momentum towards performance or sales based compensation increases every day. The current economic environment is propelling it faster than ever. Every agency leader should be proactively considering what they can learn from P&G and others like them, and based on those learning’s, construct their own go to market model.
P&G’s Sales-Based Compensation and BAL model is built on 8 simple principles. For those of you who have not had the opportunity to take a look at them, I have taken the liberty of listing them for you:
- Value Definition: focus on superior business results rather than advertising or execution.
- Degree of Unification: a single compensation budget and strategy planning process.
- Relationship Structure: long-term relationships and compensation based on value and results.
- Degree of Flexibility: ability to shift resources, funding and metrics among integrated disciplines.
- Holistic Brand Building: integrated master planning, a brief for each initiative.
- The Benefit of One: one check, one brief, one cohesive message.
- BAL (Brand Agency Leader): coordinates all agency partners, “seat at the table” for all agencies, shared rewards for brand success.
- P&G Franchise Leader: approves BAL, partners and final creative, rewards all agencies based on brand revenue.
There are a number of key insights that immediately struck me the first time I read through them.
Firstly, the focus on superior business results and sales versus advertising or execution. I keep reinforcing in my posts just how important it is for agencies to focus on solving the client’s business problems. Our clients live or die based on results and sales and they want to know that what you are proposing has a high chance of success. Risk management is a critical part of their decision matrix. Actionable insights are key to success here.
Secondly, compensation that is based on value and results by definition has to be longer term in order to be measured and rewarded. This approach is the antithesis of the current short term, pay for hours or project work type clientrelationships that are most commonplace today. Who knows, It may even turn out to be part of the cure for the current alarming trend of diminishing client/agency loyalty.
Thirdly, in this model integration is more than a buzz word. It’s a core principle that binds all agency partners together whether they are from the same holding company or not. One brief, one plan, one leader, one set of goals and a common basis for determining success and subsequent reward. The term media neutral is no longer a throwaway line, and the focus truly becomes the target consumer, the optimum way to reach them and subsequently convince them to buy the product or service.
Performance or sales based compensation is without doubt a game changer for our industry. My suggestion is that you take the time to seriously consider this issue and start formulating how best to address this trend with your agency and clients in mind. I have found from experience that it is better to be proactive and lead rather than be reactive, and have to follow what has alreadybeen prescribed for you. I believe it goes someting like “Architect of your own destiny versus victim of circumstance”!
If you would like to read more about this subject and watch an archive of the AAAA’s webinar then click here.