Brands Need To Stop Shafting Agencies -- Right Now

I was talking with the Marketing Agencies Association just the other day about how procurement was changing marketing -- and not always for the better. With the accountants now firmly in charge of media agency arrangements, the MAA was showing concern that some pretty sharp practices were being brought in. Some of the tactics to squeeze an extra margin out of suppliers was pretty awful, in my opinion and theirs, but the most obvious was payment terms.

So it's interesting to see a report from FastPay which finds that the average marketing and advertising firm now gets paid after nearly three months, that's an average of 86 days. In fact, 7% have to wait 120 days. The average payment they're waiting for is around £25,000, and so you can just imagine how small agencies in particular can ill afford to wait three months to receive these valuable payments. 

According to the MAA it's forcing a lot of agencies into financial hardship because, as you'd imagine, rent still needs to be paid and staff insist on being paid monthly rather than every quarter.

It's here, however, where some brands are crossing the line twice. The MAA told me that it has been shocked at the rise of major brands running e-procurement schemes that are not only a race to the bottom on fees, but also often include a part in which agencies reveal how long they are prepared to go without being paid. That means not only are fees screwed down, but payment terms are as well.

The worst part? These brands are then also further screwing agencies by offering an invoice factoring service. This allows agencies to take their fee early, but of course, not the full fee. As with all invoice factoring, they end up paying for the right to get access to their money before the typical 90-day wait is up. So not only are agencies being paid late, but if they don't like it, they can be paid earlier within a reasonable time frame but pay for the privilege.

There's also been a worrisome rise, the MAA tells me, in large brands inviting a dozen or more agencies to pitch while telling each agency they're only looking at half a dozen or less. The brand believes this is often made up by paying for each pitch. However, the MAA's point is that a pitch will typically contain tens of thousands of pounds of IP but each agency will only usually be paid a couple of thousand pounds to pitch. That's a pretty poor return on an agency's time and leaves so many just constantly pitching for work they are fooled into thinking they have a far better chance of winning than they actually do. 

It's not a pretty picture, is it? If brands want to be taken seriously on transparency, and they are, they can't get away with this kind of behaviour. Even if they think it is merited, and even if they're being cowardly and hiding away behind procurement, it's just not cricket, guys. Come on -- let's stop this now.

It's just not fair to treat agencies so poor particularly when it has been large agencies that have caused the transparency debate and screwing suppliers on fees hits the smaller agencies hardest, and they caused none of this. Big brands, this isn't on. It needs to stop, and stop now. 

2 comments about "Brands Need To Stop Shafting Agencies -- Right Now".
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  1. Chris Wood from Xerox, February 17, 2017 at 11:19 a.m.

    Has the worm turned? Are agencies about to push back on clients  procurement practices?

    Do the big consultancies suffer the same procurement practices when they provide digital and advisory services? Or, do their C suite relationships trump procurement?

  2. Maarten Albarda from Flock Associates (USA), February 18, 2017 at 8:44 a.m.

    Chris: consultants are often brought in by and paid from the budget of procurement so that argument does not hold.

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