When did Agencies and Vendors become banks for their Clients?

Increased pressure from brands on their agencies and vendors to extend payment windows is greater than ever

Big brands such as General Mills and Chrysler have been throwing their weight around, putting their accounts into review of which payment window terms have reached a new low – or should we say high?

Last month, General Mills’ new creative agency review reportedly demanded a payment window of 120 days. And according to a post on Digiday, “Chrysler succeeded in pushing its payment window to 180 days last fall…And around the same time…a big brand started asking for payment terms of a full year, according to the 4As, which received complaints from creative and media agencies about the terms.”

While the client in that latter situation asked agencies to “work out a deal where on paper it looked as if the agencies had agreed to payment terms of one year,” we can only assume they’re having the agencies prebill far in advance and reconcile later.

At least that’s what we work out with clients and agencies we work with, whether we’re handling a search or modernizing their agency contracts that have to include such burdensome corporate-wide payment windows that go beyond a 30-day period.

The Digiday article further reveals that some marketers requiring these abnormally long payment periods assume that agencies should get financing to cover the widening payment to expense gap. Of course the client doesn’t want to pay the financing fees. And some even use third-party invoice processing systems that charge agencies for every invoice that is submitted – non-reimbursable of course.

Thought agencies were in the business of driving brand revenue through their communications expertise, not money-lenders to clients.

We wonder if client-side staff would be okay with being paid for their services rendered 120 days out.

Definitely not.

Is this what client’s really meant by wanting agencies to be their partners?

This is just another strain in the client-agency relationship.

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Top 10 Trends for Marketers + Agencies in 2017

Trends and predictions abound, but if we’ve learned anything from the 2016 US presidential election it’s that the unexpected should be expected. So, how should marketers and their agencies plan for 2017? To provide some insights, we’ve collected top trends in reaching consumers as well as client-agency relationships here.

  1. Customer experience 2.0. Developing a more effective strategy will come from improved insights, not necessarily more data – this requires people who are visionary, not just analytical. Experimentation and calculated risk should be part of your marketing mix. Given the complexities of reaching  today’s consumers, marketers need to consider so much more. Reaching influencers and facilitating brand experiences without commitment are growing in importance. Expect to see experiential and event marketing play a more important role in the mix over the next few years.
  2. Content marketing takeover. With more people than ever getting their news and information about brands online, smart marketers will shift their messaging to driving value beyond the standard products and services offerings. Despite the rampant “fake news” during the recent US election cycle, consumers still believe what they view on digital far and away over more traditional media (who knows how long this will last!)  They get that native advertising is sponsored content, but so far they don’t seem to care much. As Content Marketing Institute’s Joe Pulizzi recently tweeted, “Native advertising is the ‘gateway drug’ to #contentmarketing (in a good way)”. And social media is where more people each year are getting their news and brand information.
  3. Mobile is more than a smartphone. According to the Direct Marketing Association (DMA), 4 out of 5 Americans always have their smartphones with them wherever they roam. But more and more people are also carrying their iPads®, Kindles®, laptops and wearable devices too. That means your content and messaging needs to work across a multitude of mobile platforms, and you’ll need to serve the right content format at the right time.
  4. TV has nine lives. Every time we read about the death knell of TV, it seems to come from someone who benefits from non-traditional media growth. In viewing trending data – viewership, ad spend, and the like – TV is still king. The younger generation is still watching TV programming – just not necessarily on the big plasma TV. As all generations look to cut the cord, TV will continue to reinvent itself to remain relevant to viewers. However, advertisers also need to reinvent their TV spots to be more engaging if they want to be viewed and not skipped.
  5. Influencers are the new celebrities. While we have yet to see influencers take over the  pitch role on traditional media, the likelihood of this changing is quite strong. Influencers are gaining traction when it comes to pitching brands on new media channels, particularly social media. According to a recent report by Celebrity Intelligence, social media influencers were among the top celebrity brand endorsers in 2016. Those with strong social media followings have talent managers, such as Gleam Futures, and they foresee marketers shifting the celebrity / influencer mix even further in 2017.
  6. Speed to market is everything. With CMO shelf-life at 2-3 years, increasing pressure to deliver immediate and short term results is critical. Long term planning and lead times seem all but dead. Agencies must be nimble and innovative – however, this is often challenging as marketers typically have too many chefs in the approval process.
  7. Analytics and Insights 2.0. Data is a great thing, but not if you’ve got faulty data. Marketers need to leverage new tools and methodologies to collect, mine and scrub their customer data. Otherwise garbage in – garbage out. But analytics that rely on simple math, 1+1=2, can turn out faulty insights because it assumes that people behave consistently. People are not math equations. We’re messy and can be inconsistent in how we think and behave at times. Just look at how all those 2016 presidential campaign predictions turned out! What people say is not necessarily what they’ll actually do. So your analytics team needs to include behavioral scientists, not just number crunchers.  Real insights will tell you whether 1+1=2, 15, 5 million or a negative integer. 
  8. More integrated agencies and blurred swim lanes. Over the past 10 years, we’ve seen the agency marketplace dramatically morph, with the biggest game-changer being  advancements in technology. New media and technology created an explosion of specialty shops while the big agencies decoupled their digital departments into standalone agencies. But that pendulum is swinging back a bit as more agencies offer full service once again, bringing big digital capabilities back inhouse or occupying the same building as a sister digital agency so they can claim one-stop-shop and easy integration. However, these swim lanes continue to blur and new competition has disrupted the agency landscape. Technology companies are adding digital creatives to their teams. Consulting companies, having expanded their practice offerings from technology advisors to forming full service digital marketing agencies (we’ll address the huge conflicts of interest in another post), are now in the top ten largest billing agencies in 2016 according to AdAge. Now marketers are feeling overwhelmed as they realize it’s not so easy to manage and integrate a huge agency roster, nor is it easy to determine what that agency roster should look like. Hence trend #9.
  9. Agency rosters will continue to morph. While the ANA recently reported that more than half of marketers foresee a review of their lead agencies in 2017, and others report the demise of the AOR, there’s a greater complexity at work than these statements would have you believe. First, the AOR model is not dead. Like anything, it’s a pendulum – some marketers are trying a pool of “lead agencies” while others are moving back to an AOR model with narrower scopes. What we see with our agency searches are clients looking to smartly curate their agency rosters. This varies from clients expanding the agency brain trust while also reducing their spend on agency compensation, to cutting the roster to an AOR or two with a handful of pre-approved project agencies. In fact, we’re seeing more project agency searches as well as the addition of specialty agencies such as those focused on experiential or millennial marketing for example. So if you’re on the roster, you need to realize that building a client relationship means not taking the relationship for granted. And for those looking to get on the roster, focus on what your agency does best and seize opportunities to start out on a project basis. Plenty of agencies that started as a project or Tier 2 agency grew the business because they delivered beyond the marketer’s expectations – in terms of the work, the results and the speed to market.
  10. Greater transparency and oversight. The recent ANA and Ebiquity report on media agencies revealed there are still flaws in agency contracts and the overall relationship. Marketers need to not only modernize their agency contracts, particularly media, but should be reviewing terms every 2-3 years rather than just updating the annual SOW. The media landscape and technology are changing too rapidly to leave agency contracts in park. Expect to see updates to key contract terms as clients strive for greater transparency and cost controls while agencies expand their business offering to include intellectual property rights (IP), business consulting services, and proprietary technology. Note to marketing and procurement:  create your own agency contract forms that have uniform basics and then channel / discipline-specific terms.

While this list is certainly not exhaustive, it should factor into your planning for the upcoming year. And of course, having a contingency budget. If we’ve learned anything over the past ten years it’s that marketers and their agencies need to be prepared for the unpredictable, and take greater risks in setting those trends rather than clinging to a “wait and see” approach.

 

Bajkowski + Partners LLC is a leading consultancy providing services to marketing and procurement teams in the areas of agency relationship management, agency search, process audits, contract and SOW development and audits, and a number of other marketing resource and marketing operations related areas. For more information, please visit our website.

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