Marketing Briefing: ‘The answer is no’: Why agencies need to reject RFPs with egregiously extended payment terms

By Kristina Monllos

Every few years it seems like there’s an outrageous extended payment request that sounds the alarm bells and resurfaces the issues at agencies. In recent weeks, that’s come from a report about Keurig Dr. Pepper’s search for a PR agency and the 360-day payment window detailed in that request.

Agency execs, search consultants and industry analysts say that they haven’t seen a request as extreme as 360-days before and that it is a anomalous exception. That said, while most payment windows average between 45-60 days, requests for 120-day and even 150-day payment terms have been observed with great frequency. The last time extended payment windows caused a kerfuffle followed word in 2019 that General Mills had requested 120-day payment windows.

Despite the abnormality of the 360-day request, the focus from some clients and procurement officers on extending payment windows has many in the industry calling for agencies to reject participating in pitches with such requests going forward. (As reported by Adweek, Keurig Dr. Pepper has selected an agency for its PR pitch seeking the 360-day payment terms.)

“As an independent agency we deal with situations like this all the time, however these terms are just egregious and exclusionary,” said Jennifer Risi, founder and president of PR agency The Sway Effect. “With a 360-day payment term, the focus is now on the cheapest vs. the best agency. Agencies that respond to RFPs like this are not only being shortsighted, as this will strain internal resources like talent, but the relationship is likely to be short-lived.”

The 360-day request makes clear that the relationship will be a “transactional” one rather than a partnership, explained Marla Kaplowitz, president and CEO of the 4A’s, adding that agencies shouldn’t be treated as banks and that the requests puts agencies in a difficult spot as they have their own bills to pay.

“Agencies need to push back when it goes beyond 60-day [payment terms] – and 60-days is bad,” said Ann Billock, partner at search consultancy Ark Advisors. “There’s a whole chain of people who need to be paid [by the agency]. This will set off a chain reaction of people not getting paid.”

Lisa Colantuono, president of search consultancy AAR Partners, echoed that sentiment. “Every single agency should have said, ‘Goodbye, we’re not taking it.’ If everyone says no, well, then what happens? They have to go back to the drawing board. The answer is no. No goes a long way when you know how to treat yourself like your own best client.”

Agency execs and search consultants noted that procurement officers should try to find other ways to work with agencies to benefit the brands rather than focusing so narrowly on payment terms. Whether or not procurement officers will do so – especially when there are still agencies willing to put their hats in the ring for the contracts with extended payment terms – is yet to be determined.

“Marketers would be much better suited to try to push …read more

Source:: Digiday