Global drinks giant Anheuer-Busch InBev, which owns brands including Budweiser, Corona and Stella Artois, is set to review its global media business via a "reverse auction process", sources familiar with the matter told Campaign US this week.
The process, which sees agencies bid lower and lower to win the business, is controversial because ad industry executives fear it ignites a race to the bottom that devalues their work.
Sources also claimed it was demanding "unfair terms", including an extension in payment terms from 120 days to 150 days. They said agencies should band together to reject the brief. AB InBev has called the speculation "false and misleading" – but the debacle reignites debate about how agencies should respond to any perceived unfair terms.
It follows a similar row about Audi, which last year – to the surprise of the industry – put its long-standing, 37-year relationship with Bartle Bogle Hegarty London up for review. BBH retained the account after pitching against Engine, M&C Saatchi and VCCP, but BBH's Publicis stablemates Leo Burnett London and Saatchi & Saatchi London, as well as Lucky Generals, Ogilvy and VMLY&R, all declined to pitch – with some citing concerns over the fact that the pitch was procurement-led.
It also follows speculation about a reportedly "protracted" media pitch run by Ferrero, with contenders Starcom and PHD initially failing to agree to its terms (although Starcom won the business).
There can be no ad industry without clients to serve. But should agencies work together to stand up to unreasonable client demands in order to protect the value of their work?
Victoria Fox, chief executive, AAR
Yes. Most clients want to forge good, productive partnerships and behave respectfully. With the minority who do make unreasonable demands, agencies should feel more confident saying "no" but, in a highly competitive, oversupplied market, this is hard. Collectivism – knowing that your peer group will respond similarly when faced with the same unreasonable demands – is key here and agencies need some support with this.
A voluntary "code of engagement", along the lines of the CAP Code, endorsed by the professional associations representing agencies and, importantly, by ISBA, would give that collectivism some teeth and help agencies to push back with confidence.
Chris Hirst, global chief executive, Havas Creative
Agencies and clients are partnerships. Or at least they should be. Punishing payment terms that make agencies wait months to get paid for the work they are toiling over won’t get the best out of them. It’s not in anyone’s interests to get involved in a fight to the bottom or to stage a wholescale mutiny.
What the industry needs is an honest, open conversation about what agencies can deliver and why they’re worth it – and the self-belief to say it out loud if clients choose not to see it.
Bill Scott, chief executive, Droga5 London
As an industry, we should not shy away from a principled and united stance on unreasonable demands. In an aggressive buyer’s market, the client is looking for all forms of enhanced value – and unreasonable demands can all too quickly set new precedent and become the norm.
Agencies need to take a more confident stance and have better inter-communication to navigate these demands, or at least open up a more transparent dialogue on them. United we stand. Divided we fall.
Christian Polman chief strategy officer, Ebiquity
The question here is not whether agencies should push back on commercially challenging terms – that is a commercial decision that's up to them – but rather what the consequences are for brands that impose such terms on their agency partners.
Brands should be aware that key financial terms impact access to talent and thinking, and other key resources that change the quality of work, whether media or creative quality and value, with an ultimate impact on business results.
Brands must consider these trade-offs when negotiating agency partner terms and ensure they receive sound strategic advice and guidance throughout complex pitch processes.
Scott Moorhead, founder, Aperto One
I have often wondered why agencies don't take a collective position on basic business practices, whether this be payment terms or other areas. Unfortunately, this is unlikely due to agency competition, fickleness of advertisers and the global nature of the business.
Asking for 150-day payment terms in media only demonstrates a severe lack of understanding of the media market and terrible procurement. In most circumstances, it will cost their business far more than they think they are saving or deferring in cash flow.
At Aperto One, we always advise fair payment terms. We are not one of the intermediaries that are driven only by manufactured cost savings. Our role is to deliver growth through smarter partnership.
Paul Bainsfair, director-general, IPA
It’s about time clients stopped trying to impose demands like this and agencies stopped accepting them. But we know, as the professional body for agencies, they can’t do this alone, which is why I feel we should voice their concerns.
Along with identifying the best agency, the process should be fair, transparent, efficient and provide a tangible method for quantifying the value and relevance of intangible expertise. Not the cost. The decision should be made methodically, based on best practices, of which there are a number of available IPA and joint IPA/ISBA resources to guide both sides.
These include our Creative Services Framework Agreement that calls for agencies to be paid on 30 days from invoice – not 60 days and certainly not 150 days. We have also produced a new IPA/ISBA guide on "Finding an agency" that specifically helps clients to develop fair and transparent process that provides them with a breadth of knowledge to engage with agencies without asking them to incur excessive costs.
And I would highly recommend both clients and agencies read the IPA’s Price of Success guide, which documents why price problems can kill agencies and outlines the six key factors agencies should consider when evaluating how they are pricing themselves.
While some clients may behave unfairly and unacceptably – and those that do should be called out – it falls on agencies to help educate clients. Through this, we will we achieve the mutual win-win to transform both the client and agency business.