Coty Wants Five Months To Pay Its Agency Bills
- by Steve McClellan @mp_mcclellan, April 14, 2015
Perfume
marketer Coty has launched a global media agency review and has told potential candidates that it wants five months to pay its bills.
According to sources, the client’s brief focuses in large part on efficiency, with little if any attention to effectiveness or consumer insights.
Omnicom’s OMD — which handles Coty media duties in the U.S. and other markets -- is not participating in the review, according to sources. OMD declined to comment, and Coty officials could not be reached for comment.
Other marketers have demanded extended payment terms, but it is believed that Coty’s demand for five months may be a record — assuming that participating agencies agree.
The Coty advertising account is large, so its demand for the extremely lengthy payment terms may get some takers. The firm’s consolidated expenses for advertising and promotional costs were $1.070 billion, $1.072 billion and $1.086 billion in fiscal 2014, 2013 and 2012, respectively, according to the company’s 2014 annual report.
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Ha ha ha ha ha ha ha !
Ouch!
https://www.linkedin.com/pulse/coty-five-months-why-year-come-industry-can-take-marcelo-salup
60 years ago The Coty Girl was famous advertising even to an 8-year old, and they probably paid 15% and 17.65% and paid in 90 days. Today, they are really asking for financing and that can be arranged in a mutually agreeable fashion even as their advertising goes unnoticed.
Do they care if agencies get kickbacks...sorry, rebates? All they really need is a bank with a media department.
Sadly, they are not the first gigantic client to demand this absurd payment schedule. I am personally aware of another global cpg company that has a similar agreed to arrangement. Agencies shouldn't be pressured into becoming banks for clients that are simply financial bullies. Is it any wonder that agencies seek out new ways to create revenue as clients demand more and more but continue to reduce compensation? Agencies simply have to start saying no.
With efficiencies being the main driver behind the pitch, it's surprising how easilly Coty has lost leverage: 60% of total holding-group-managed inventory/deals are now out of reach with Omnicom, WPP, and Dentsu-Aegis pulling out of the pitch...
I'd do it - at double the going rate as a minimum.
And then the agency demands the same terms from the media, etc. and it just spirals down until someone goes out of business because they didn't get paid! Definitely time to just say no!
This is ludicrous. The government should look at anything beyond 90 days as the equivalent of an interest free loan and tax corporations on the basis of what interest they would have to pay in the open market for those loans. Andthey should provide tax crtedits to agencies that are esentially underwriting those loans.
I think Coty has a valid point: they believe that Advertising is a cost, not an investment, so they are not asking for differentiating comms, much less for intelligent advice. They are looking at agencies as resellers of media inventory. Which is a fair perspective if you follow the recent hoopla about agencies making obscene amounts of money behind clients' backs. So why wouldn't Coty try to squeeze at least some value back from the agencies. It is a very logical financial suggestion and it is too easy to blame clients for treating our industry as a financial middlemen that we have morphed into.
@Martin, don't you think that your comment about agencies making "obscene" amounts of money behind their clients' backs is out of proportion to what was written in this piece? I don't recall any specific cases being mentioned, nor the amounts involved. Indeed, the article and various statements by the financial analysts suggested the possibility of some unspecified rebates and noted thet these may be a case of clients not fully understanding what transpired----even if they were informed about it in advance and agreed that it was acceptable. As for Coty, all it will get for its trouble is the kind of service it pays for----plus higher media rates to cover the "float".
@Ed: agreed, "obscene" discloses my personal disgust with a business model, whose self-destructive effects can be witnessed in exactly the move that Coty - and before them Mars (http://bit.ly/1gq3oPV); P&G (http://bit.ly/1E5HAoj) and AB-InBev (http://bit.ly/1OiMX38) - has just made. But the fact is, most of WPP's clients' CFOs would be overjoyed to have profitability anywhere near WPP's 30%.
And while we are talking about making money: you know what is also at least strange if not obscene: go ahead and google Europe's best paid manager and every single ranking will show Martin Winterkorn of VW with his 16MMEUR pay in 2014. If I would be a client of WPP I would be really irritated to learn of Sir Martin's pay of 56MMEUR in 2014. (http://bit.ly/1DLEbcn). How come that never gets into the rankings? If you do the math: it means that Martin Winterkorn only gets a measly 80TEUR for each billion of Volkswagen's turnover (200BNEUR), while Sir Martin's package gives him exactly 50 times (!) that amount (4MMEUR) for everyone one billion EUR worth of turnover at WBB (15BNEUR).
Fine, maybe that is not "obscene" and sure, I am just a greedy media planner, but the last thing I feel like doing is blaming the procurement folks at Coty for trying to hold on to their money. What we need is a move by all three sides of the industry: clients, media, agencies, to move to a different model that isn't just fair to clients with the clout of a Coty: With transparency, everybody wins and agencies would compete on the intelligence of their advice, not based on their financial clout to make good money on clients DESPITE their 120 day terms.
Why is it that all other forms of advertising are paid up front or within 30 days. Ask yourself does a “Big Search company” allow for that - the answer is no. Does a “Big Social company” do that = no - so why should we?
What if we as an community started tell these brands no – what choice would that have but to do it in house and pay for it daily or establish fair terms for all. For in the end, its the publisher that suffers with these type of terms. Basically they are asking the publisher to do a net 8 months...Net 240 days.
I can't believe this is even news - doesn't the business still deal in discrepancies? Are we ignoring the laws of supply and demand? Anyone who won't want to wait 5 months for your money can skip the RFP! Am I missing something here? Most media sellers will carry a delinquent account from a traditionally strong client for a year or more, if necessary, so who is the pressure really on? Agency takes the business or not, knowing 5 months, media seller takes the business or not knowing 5 months and it all works. Don't like it don't pitch it.
At one time it was 10 days and 2% discount. And agencies paid for the advantage. Now they want you to pay them. There is a crash foreboding here. Yes, no works, until a greedy agency says yes, the top levels level themselves out with great profits and everyone else pays for their income and loses. Credit never paid no matter what business = crash.