Broadcasting Telecasting (Jan-Mar 1956)

ANA DELEGATES ANTICIPATE CONTINUATION OF 15% FEE Advertisers in convention at Hot Springs, Va., last week expect: • No disruption in the current pattern of ad buying • Trend toward broadening of agency marketing services • Little prospect of a fee-chopping battle among agencies ADVERTISERS will continue to do business with their agencies and with media on roughly the same 15% fee basis for a long time, despite the Dept. of Justice consent decree, judging by a consensus of major advertisers. Any talk of an imminent revolution in the way advertising is bought was quickly dispelled last week at the Assn. of National Advertisers spring convention at the Homestead, Hot Springs, Va. Three days of meetings, plus two closed-session huddles devoted to the consent decree with the American Assn. of Advertising Agencies, left these impressions: • Broadcasters will still get their payments from advertisers minus the traditional 15%, or something close to that figure. • A trend toward broadening of agency functions into a general marketing service, under way in recent years, will be speeded up by the decree. • Advertisers aren't going to discourage agencies from collecting their usual 15% from media, but they will willingly pay special service fees above 15% for marketing, research and similar services. • The fees paid will be based on individual contracts between advertisers, agencies and media. No organized policy is involved, and ANA members won't even discuss the subject openly on a group basis or as spokesmen for their companies. They're not going to get caught in any advertiser consent decree. • There's no immediate prospect of a cutthroat, fee-chopping battle among agencies. Most advertisers figure the long-time 15% agency payment plan has been satisfactory, in general, but they don't mind paying out of their own pockets for extra agency services of a skilled nature. • In any case, the nation's economy of abundance is keyed to successful advertising, and the creative services supplied by agencies mustn't be ruined by fee chiseling, advertisers feel. Summing up the opinions of individual advertisers, after hours of closed-door talking, Edwin W. Ebel, advertising and consumer relations vice president of General Foods Corp. and ANA board chairman, gave these views as panel moderator: "Advertising has made a major contribution to our enviable economy. Agencies have contributed greatly to advertising and marketing. The commission has provided rewards for agencies where reward is due. "However, the commission system is no longer immutable either as a practical or ethical matter. Without a fixed compensation system each of us can determine the service that is fitting to our individual needs. The service is more important than the fee. We have a chance to improve on the commission system. "Any new fee plan will require the advertiser to distinguish between the quality of available skills — the skills that go into marketing and advertising planning and preparation. "The commission system, which just grew into being, has served advertising well for a long time. Let's not go hastily tearing down arrangements which have been satisfactory until Broadcasting • Telecasting we are sure we have a better one to take its place." Paul B. West, ANA president, took part in the panel discussion. With him were Gilbert Weil, ANA general counsel, and Ira Rubel, accountant and consultant. Other panel members were Don Frost, Bristol-Myers; Fred Bowes, Pitney-Bowes; George E. Mosley, Seagram Distillers Co.; J. B. McLaughlin, Kraft Foods; David F. Beard, Reynolds Metals; Henry Schachte, Lever Bros.; Ralph Winslow, Koppers Co., and George Frost, Cannon Mills. ANA members and their guests, totaling over 500, concluded what officials of the association called their most successful spring meeting. Thirty-six new members were present. While radio and tv were discussed, principal interest centered around the consent decree impact on advertisers. A majority of the formal sponsibility of each individual advertiser to determine what kinds of services he will require and get from the agency; to determine what the value of those services performed by the agency is to the company; to determine what price he is willing to pay for such services and on what terms." And as to agencies, he said, "it will continue to be in the future as it has been in the past, the individual reponsibility of each individual agency to determine what kinds of services it will provide its clients and what the scope and character of those services will be; to determine more precisely what the costs of specific services are; at what price and on what terms they will be provided for the client." Mr. West added, "I believe the advertising business will continue to grow and prosper in the healthy American tradition of free competitive private enterprise and that there are no problems that cannot be solved to best advantage all around by fair dealings between buyer and seller and by good business conduct that will stand examination legally and ethically." Conceding there is "a profound difference" as a result of the consent decree, Mr. West said it seems clear "the organized national advertising structure" alleged by the Dept. of Justice to have existed since about 1917 is no longer debatable as to its merits or shortcomings, whether on grounds of ethics, or any other AMONG delegates at the Assn. of National Advertisers meeting (I to r): Don Frost, BristolMyers; David F. Beard, Reynolds Metals; Arthur Walsh, Southern New England Telephone Co.; Les Aue, Drackett Co.; J. L. Barowsky, Adell Chemical Co.; W. G. Power, Chevrolet Motor Div.; William B. Smith, Thomas J. Lipton Inc. speeches were devoted to advertising, sales and marketing techniques. A "brainstorming" session was held Thursday afternoon after Willard Pleuthner, BBDO vice president, explained this conference technique of ordered thinking. Bristol-Myers, Corning Glass, General Foods and General Motors are among corporations that use this method to generate ideas. Mr. West, summing up the agency fee discussion, saw no "drastic changes in the near future," since long-time customs aren't likely to be dropped suddenly. The standardized agency fee, and terms of payment, have served "reasonably well," he said, with advertisers now asking more and more services from the agency — needs that have been met "for the most part within the framework of the 15% commission, on a buyer and seller basis." These needs will continue as it becomes necessary to sell goods and services on an expanding scale, he said, and will guide what kinds of agency and media services will be provided in the future. He said individual media will continue to determine the kind and character of communications vehicle to be provided advertisers as well as the price and terms. As to advertisers, he said, "It will continue to be in the future as it has been in the past, the individual re grounds." This isn't startling, he said, since in reality the fees paid have been the individual responsibility of media and agency, "and not a responsibility to be defaulted or to be delegated to an organized body." Only time and custom will determine whether the traditional 15% commission, or discount, continues, he said, adding that time will tell whether any standard commission plan will be maintained voluntarily by voluntary actions of individuals. Mr. West summed up the advertiser's situation this way: "It is clearer now than it has been at any time in the past, that the key to the problem of responsible advertising management is in the procedures, and the ways and means now being developed by the ANA's Advertising Management Committee for better planning, better organization, better administration, better measurement. This, I believe, is bound to lead to better agency relations, and this in turn will pave the way to more productive and more profitable advertising. "In my best judgment, the results of the action of the Dept. of Justice sum up this way: With the experience and resources now available including, of course, your organization, the ANA, any responsible advertising manager March 19, 1956 Page 31