BS From Big Spenders
Mar 20, 2009
Several major marketers, including General Motors and Anheuser-Busch, are now asking advertising and media outlets to wait up to 120 days to be reimbursed for production costs and media outlays.
You have got to be kidding, right?!
That’s BS. Agencies are not banks. If we are doing our job right and if our clients are gaining market share as they should be during these tough economic times, then clients should pay us, on time, period. On the other hand, if as an agency you’re doing your job, cash flow won’t be a problem. Think about that!
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Economics: the allocation of scarce resources which have alternative uses.
The scarce resource these days is money.
On a sinking ship, the scarce resource is either (1) time or (2) manpower/resources to plug the holes and right the ship.
The nervous impulse to buy time (and briefly save money) by throwing a few of the guys slaving away (at trying to save the ship) off the boat to lose some weight is immature at best, and irresponsible or even suicidal at the worst. There’s a lot of ways to buy time and get adequate resources to right a business ship. Some are better than others. Delaying paying your providers is just biting the hand that is feeding you.
The other issue regarding economics, and one which is routinely confused in media and government, is NOT what are we trying to accomplish (goals), but what INCENTIVES are we creating? Appropriate incentives will nearly always bring you to your goals. Lofty and short-sighted goals, however, will not, by definition, bring you to your goals alone. If the goal is to save money, and you cut spending to save money – this still does not answer the question of what incentives you have now created. Perhaps you have briefly and seemingly “fixed” the problem of financial leakage, yet only to find out the ruter of incentives is now perversely sending the entire ship careening into some unforseen direction toward even worse peril.
I think it was Winston Churchill who once said, “It is not enough to say we are trying our best. We must succeed.”
In this instance, it seems like GM and Annheiser have re-written this to say, “It is not enough to say we are trying our best. But that’s what we’re doing anyways.”
I suspect that there are several ways to deal with this kind of scenario:
1) Work with them and struggle it out, hoping for the best and that you will be rewarded for your loyalty likewise when things get better
2) Play hardball and try to negotiate back to 60 days or even 90 days
3) Play for keeps and demand payment up front and in full.
Probably option three appears the worst because of (a) the amount of potential long-term money (and reputation) which comes with being aligned with such big hitters and (b) it’s way too scary – plus it could be a big mistake OR a big victory.
But Zimmerman has a reputation too. And option three could indeed be the right choice, though the most difficult.
PROS:
1) New Clients: Increased determination to be more self-reliant and “choosy” as to the it’s clients
2) Admiration: Greater, in the long-term, respect from other businesses (who also hate getting paid four months late, I might add, and can relate)
3) Freedom: Opportunity to revisit these companies again down the road, at their choosing and on their terms.
CONS:
1) Immediate loss of revenue
2) Possible burned bridges and nasty aftertaste with these companies – maybe for years
3) Possible damage to reputation from other slow-paying companies, or potential slow-paying companies
VERDICT:
This is the position Zimmerman is in today…