Late payers P&G and Mondelez are hurting the ad business – and it’s all my fault!

P&G and Mondelez are adjusting their payment cycle. And it’s all my fault.

From now on if you are a Mondelez agency you will do your work and wait four months to be paid. If you want a laugh, read the tortured language of the Mondelez CFO on the subject:

“Although our same delicious globally renowned brands are still joyfully crafted by the same world-class people […] In order to remain competitive, reflect current industry standards and drive world-class growth, we need to change payment terms.” [Financial Times, May 30]
The mind that crafted this world class nonsense controls a hand that is on the tiller of a company I invest in. And the worst of it is – he’s steering his boat to please me.

Me and loads of other big and small investors. Through the medium of Wall Street we tell big companies that what they make and how they market it is unimportant. What matters for businesses in mature markets is cutting costs. So, when Wall Street looks at the quarterlies, they will have adjusted cost enough to keep the numbers looking good. The stock will hold up or even grow. My investments will sell at a higher price.

But there’s an old saying – those who know the price of everything know the value of nothing.

The thing is – I’m not just an investor. I also run an ad agency. And this craftily orchestrated increase in my personal investments is hurting my industry.

What P&G and Mondelez are proposing is nothing short of bullying. They’re saying: the ad agencies aren’t as big or as strong as us. We can reduce what we pay them and delay paying them. A double whammy. Very smart, from the numbers side of things.

Despite his shameful use of jargon, I’m sure the CFO of Mondelez isn’t dumb. Given the position he’s been put in, he’s probably making a reasonable decision.

Usually people become bullies because they’ve been bullied themselves. I’m willing to bet Mondelez has gone through their fair share of suffering. Have you ever tried to negotiate with Wall Street? Or with Walmart?

But – at the risk of being called an incorrigible optimist – I believe that your ability to buy will depend on your behavior as a buyer. No matter how big you are. If you treat your suppliers badly – if you put the screws to them to lower their costs and force them to compromise the quality of their product, you’re not only going to get a bad product, but your suppliers are also going to stop picking up the phone when you call.

And if a client comes calling with a once-a-quarter payment plan, I can promise you – I’m not going to pick up.

I think of advertising agencies as the architects of brand values. In a world where consumers have thousands of chocolate bars to choose from, why are they going to choose yours?

The problem is that people who are talented and thoughtful enough to communicate on behalf of brands in a way that actually earns a consumer’s time and interest don’t want to work in a culture that talks like the CFO of Mondelez. They don’t want to be “contracted in,” underpaid, and then hung out to dry. They want to work somewhere where the value of what they create is appreciated. Treat them badly and they will work for your competitors. And when they do, they will damage you.

And it’s all my fault.

Sorry.

This post first appeared on The Fearless Group blog.

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About Jerry Judge

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Jerry Judge is a co-founder of self-styled ‘capitalist collective’ The Fearless Group. Based in New York. Fearless is a new-style agency bringing together senior people from a number of marketing disciplines. Born in London, he has worked in senior management roles in a number of top creative agencies including TBWA, BBH and Lowe in London and Lowe in New York. He then became CEO of Lowe International (now owned by Interpublic) and oversaw the merger of Ammirati Puris Lintas and Lowe in 1999.

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    I have just recently written about the conundrum as well. The pain is much more pronounced for media agencies. I titled my post: “The media agency conundrum: advertisers want more, pay less and trust no-one.” http://malbarda.blogspot.com/2013/06/the-media-agency-conundrum-advertisers.html