By STUART ELLIOTT
New York Times
Advertising
ONE of the nation's largest marketers, General Mills, is seeking to transform the way it works with its agencies — and vice versa — in a shift that underlines the changes that are remaking the advertising industry.
The moves by General Mills, which sells products under brand names like Betty Crocker, Big G cereals, Green Giant, Nature Valley, Pillsbury and Yoplait, give new authority to the agencies and revamp compensation. They are taking effect with the company's 2007 fiscal year, which began June 1.
General Mills, which is based in Minneapolis, spent $529.9 million to advertise in major media last year, according to TNS Media Intelligence, a unit of Taylor Nelson Sofres that tracks ad spending, compared with $576.9 million in 2004.
The changes show how marketers are confronting challenges like increased competition, the fragmentation of the mass market and the rise of new media.
The shifts are intended to "completely overhaul the way we work with our agencies," said Mark Addicks, chief marketing officer at General Mills.
They are part of "a really strong push for growth" in revenue and profit at the company, he added, and a desire "to be the growth leader" in the packaged-foods categories in which General Mills competes.
One change is meant to help General Mills adapt to the new-media landscape as it tries to reach consumers using nontraditional approaches like the Internet, e-mail marketing and branded entertainment.
"The old media are alive and well, but the new media are in a very steep growth curve," said Jeffrey Merrihue, chief executive at Accenture Marketing Sciences in London, a unit of Accenture.
"You need to plan to take advantage of the opportunities and prepare for a future when the new media are more and more important," Mr. Merrihue said.
General Mills will let its two principal agencies, Campbell Mithun and Saatchi & Saatchi, determine the media in which ads run and which agencies will create them, in a bottom-up approach. Previously, the approach was top-down as brand managers at General Mills coordinated those efforts, working not only with the principal agencies but also with agencies that produced online, retail and minority campaigns.
The goal is "to make sure a campaign, from the get-go, is media neutral, going to the best place for that brand," Mr. Addicks said. Media neutral means that ads run where they belong most, rather than in outlets predetermined by tradition or the size of a commission.
Campbell Mithun, part of the Interpublic Group of Companies, and Saatchi & Saatchi, part of the Publicis Groupe, will become what Mr. Addicks and Doug Moore, vice president for advertising and branding, are calling "brand navigators." That is, they gain the authority to decide how to produce all types of campaigns that are integrated across all forms of media outlets.
According to an annual survey by Nancy L. Salz Consulting in New York, only about a quarter of advertisers allow agencies to be the primary coordinators for accounts. Executives at General Mills said the agencies requested the shift.
Peter Hubbell, executive vice president and general manager for the General Mills account at Saatchi & Saatchi in New York, said he believed the rewards would outweigh the risks. "Trepidation comes into play only when we're given responsibility for an outcome but not authority," he said. "Call it what you want, holistic marketing, integrated communications; everyone is talking about the right way to do it," Mr. Hubbell said. "General Mills saying to us, 'You guys decide who you want at the table' — that's pretty powerful."
Mr. Hubbell's counterpart at Campbell Mithun in Minneapolis, Mike Nelson, said he liked to think of the new method as "upstream planning."
"This is a key difference from the past, when the client said, 'This is what we want to do; come back to us with something,' " said Mr. Nelson, who is executive vice president and worldwide account director at Campbell Mithun. "This involves us earlier and gives us the ability to steward teams and lead."
General Mills is also changing how it will pay its agencies. The company is adopting what is called pay for performance or performance-based compensation — that is, payments based on results in the marketplace for the brands being advertised.
Previously, General Mills had paid its agencies using a mix of methods, which included commissions based on the amount of money spent on ads regardless of their effectiveness, performance incentives and the results of annual evaluations.
"There's a lot of skepticism at agencies when you try to introduce performance-based compensation that you're trying to take money off the table," Mr. Moore said. "This is absolutely not the case."
Rather, Mr. Moore said, "when we beat plan, the agencies will make more money; when we make plan, the agencies will make a certain amount of money; and when we miss plan, the agencies will make less money."
The benchmark for measurement will be what General Mills refers to as reported net sales, which subtracts the effects of retailer incentives, coupons and other discounts on prices of products.
There is a floor below which compensation cannot fall, Mr. Moore said, and a ceiling that he described as "a generous incentive to try to hit."
About half of all advertisers have adopted some form of pay for performance, according to the annual Salz surveys, which date back to 1986.
"It's a big opportunity for the agencies," said Nancy L. Salz, president of the consultancy. "They can lose big, but they can also win big."
"Advertisers using performance-based compensation report many positives and almost no negatives," Ms. Salz said. "Agencies are pretty much happy with it, although many report a negative effect on compensation."
Mr. Hubbell of Saatchi & Saatchi summarized all the changes this way: "It's a more intelligent way of having us work and a more intelligent way of paying us for that work."
Saatchi & Saatchi's work for General Mills dates to the 1920's, through a predecessor agency, Dancer Fitzgerald Sample. The brands the agency handles now include Cheerios, Green Giant, Pillsbury and Yoplait.
Among the agencies being overseen by Saatchi & Saatchi are Bromley Communications, for Hispanic campaigns; Burrell Communications, African-American ads; Publicis Dialog, interactive; and Zenith Media, media planning and buying.
Campbell Mithun has worked for General Mills since the 1970's. The brands it handles include Betty Crocker, Cinnamon Toast Crunch, Hamburger Helper and Nature Valley. Campbell Mithun is a partner of another Interpublic agency, the McCann Worldgroup, which handles General Mills brands in overseas markets.
Among the agencies that Campbell Mithun will oversee are Casanova Pendrill Publicidad, for Hispanic campaigns; Marketing Drive, retail ads; MRM, interactive; and Carol H. Williams Advertising, African-American campaigns.
Comments