Looks as though the agency establishment, which has been beaten up by client procurement departments for years now, has discovered some reserves of backbone at last with Omnicom boss John Wren (left) saying that his agencies have recently turned away business from clients seeking extended payment terms.
“We’ve turned down and not accepted clients that we could have won because we weren’t prepared to accept the terms they were offering,” Wren says.
“We’re not a bank. I think if you speak to my competitors, they’ll all three agree with that concept… that’s not what we’re here for. And anybody who wants to treat us like a bank can go to a bank.”
Wren’s strong words have been echoed by Publicis Groupe’s Maurice Levy, Michael Roth of Interpublic and, in an interview at Cannes recently, WPP’s Sir Martin Sorrell. But Wren, CEO of the world’s second-biggest marcoms group after WPP and the biggest ad agency owner, is the first to say he’s actually done something about it.
Wren’s stance is one in the eye for the likes of Mondelez International, the former Kraft snacks business, and AB InBev, the world’s biggest brewer, which have been trying to push agency payment terms to a scarcely credible 120 days. Others including Procter & Gamble have also sought to increase terms.
Such moves are potentially ruinous for agencies, especially as many big companies don’t even start processing invoices (including arguing about them) until after the agreed payment date. Marcoms companies are not immune to this themselves, of course.
But Mondelez, InBev and co seem to have badly misjudged their latest cheese-paring initiative. Corporate profits are on the rise and interest rates are at record lows so they can hardly claim they need help with their finances. Some, including Mondelez, have even had the brass neck to offer agencies help with financing the extended terms: in effect lending them the money they need, at interest, until they eventually get paid.
And the marcoms giants themselves are seeing a strong recovery in both revenue and profits so, for once, they can tell such clients to get lost. With global advertising these days concentrated mainly among a small number of holding companies global advertisers need access to them. For once the payment boot seems to be on the other foot.