Speaking at a Guardian event about brands, agencies and payment terms, Hailo’s CMO Gary Bramall said marketing should “man up” and tell finance and procurement that maintaining a strong agency relationship is more important than saving money by employing extreme payments terms.
His comments follow concerns that finance and procurement are becoming more involved with agency pitches and payment terms. Scott Knox, managing director of the Marketing Agencies Association cited the ABInbev and Heinz pitches as examples of an “alarming rise in tactics” over the past 18 months.
This includes asking for 120-day payment terms and asking agencies to accept a 5% rebate to fund brand’s CSR activity.
Ian Graham, a partner at accountancy firm Kingston Smith, said he is seeing extreme examples becoming “more and more extreme”, which is having a trickle down effect on what is considered normal.
“Whether finance and procurement in big organisations are looking for what they perceive to be low hanging fruit. Payment terms has come up as an area where the think they can get more value out of their agencies without really considering the impact,” he said.
“By engaging in this behaviour we run the risk that the best creative work isn’t what you end up with, you end up with an agency that is prepared to do satisfactory creative work at a price that is acceptable just to them. That is a race to the bottom that is not going to be in the industry’s long term interests.”
However Bramall believes it is up to marketing to ensure that agencies are getting a good deal as only then will they be able to product great creative that can help drive business growth. That also means making the business case to the CEO or the board for why harsher business terms might not be in the best interests of a brand in the long term.
“A marketer wants to create the best work he can with the biggest business impact – the potential a marketer should have should be to transform a business. Saving 5% by the CFO cutting away some terms – I don’t want to work for a business looking at 5% growth as the definition of success. Any self-respecting marketer should be standing up and saying ‘if we lose this supplier we are going to fail to hit our growth targets’,” he said.
“Marketers are the ones who hold the relationship, they are the ones who are in charge of growth in the business and they are the ones that should be influencing the CEO.”
Agencies should also stand up for themselves
It is not just marketing that should stand up for itself, Bramall also suggested that sometimes agencies should refuse to work with brands that don’t offer favourable payment terms or are known for “bad brand behaviour”.
Knox agreed, saying there are occasions when agencies should be more sensible and say “not this time”, although he pointed out that can be difficult when other agencies are willing to take on the brief and it could have a big impact on the agency’s business particularly if they are the incumbent.
Another way agencies can help solve the problem is by building long-term relationship with clients so they become indispensable.,
“The start of the relationship is deemed as being the end point for a lot of agencies. When a pitch has been won they think that is it. But there is the potential opportunity for agencies to get a little more engaged with a the client and start to build a relationship rather than trying to have an affair,” Knox explained.
“In pitches I try to differentiate with agencies between passion and commitment. Passion is fleeting.”