Swiss food behemoth Nestlé has announced that its approach to marketing is set to undergo a radical overhaul.
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Nestlé’s adverts appear in 150 countries and they are handled by many big multinational ad agencies. It has now announced however that as from January those agencies will no longer receive commissions that could total up to 15% of the company’s US$2.2bn annual marketing budget.
Al Stefl, senior VP of communications at Nestlé’s US division told the Wall Street Journal Europe: “The crux of the matter is that, in the past if we said we would spend US$10m on commercials on CBS, the agency would get 15% of that.
“Our goal is not to reduce what we pay but to get better performance from the companies that make our ads.”
To this end, Nestlé is offering to pay all US agencies annual fees calculated according to the number of hours they spend on Nestlé projects. The company is also using bonuses as incentives in the event that an advert is attributed to a product gaining larger market share or higher sales.
According to the Wall Street Journal, smaller companies are likely to take their cue from Nestlé on the marketing front and adopt a similar system.
