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More Brands Delay Payments to Agencies
By: Dwayne W. Waite Jr.
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Imagine that you are a massage therapist. A customer walks in and says that they need you to perform your services for their entire company. They want the message to be done well, efficiently, and without any complications. And for your efforts, you would be paid in 75–120 days after your services.

Would you take that deal? 

Of course you wouldn't. Yet, big brands are quickly shifting over to that payment model for advertising agencies. Yes, brands like P&G, Johnson & Johnson, Mondelez, and A-B InBev have all pushed their payment terms to fulfillment in 75–120 days.

The reason? Mondelez told the Financial Times that doing this would help them "better align with industry and make sure we compete on fair grounds...", while the other brands made no such hollow statements.

In an industry where the value is the people, agencies and their advocates are far from tickled about this news. It truly shows that these big brands are no longer interested in developing win-win relationships. No, adding such a paying policy that would force many agencies to run lines of debt on the promise of being paid is no starting point for a positive, friendly business relationship.

Now P&G, though reportedly the largest advertiser in the world, is taking a chance. So far not many agencies have turned down business because of the new terms, but if other brands try to follow P&G's lead, we would hope that our colleagues have the courage to take a stand.

We need more advocates like the IPA finance director, Alex Hunter, who called this kind of behavior by brands "nonsensical." Because it is.

In short, it's a power move — they believe that they don't need the agencies that they work with, and will try to slim out the ranks by providing ridiculous options. And those who are willing to accept the ridiculous terms prove them right. We cannot let them define these kind of outrageous terms.

It is another way to rule out the smaller agencies and continue to bolster the holding companies. Only so many of the smaller shops can survive without 120 days of payment from a big brand, but a holding company's economies-of-scale position them perfectly for such scenarios. Therefore, with less competition from outside sources, the advertising train of thought will continue to be untested, and innovation and creativity could suffer. And AdLand will face the "cries for creativity" all over again, because the brands chose to look at their pretty bottom lines instead of the future.

And so it goes.


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About the Author
Dwayne W. Waite Jr. is partner and principal at JDW: The Charlotte Agency, a marketing and advertising shop in Charlotte, NC. He enjoys consumer behavior, economics, and football.
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