Thai agencies struggle to create new billing systems for clients

<p>Thailand's advertising industry is facing a challenging adjustment </p><p>during 2000 as agencies struggle to create new billing systems for </p><p>clients. </p><p><BR><BR> </p><p>According to research conducted by Bangkok-based consultant Adarco, </p><p>agencies found it difficult to adapt to changing market realities in </p><p>1999, specifically the introduction of media specialists. </p><p><BR><BR> </p><p>Adarco managing director Sara Fielding said 2000 should be a good year </p><p>growth-wise, but profit margins would remain tight until companies sort </p><p>out billings and add value to clients. </p><p><BR><BR> </p><p>"Some have reduced agency commissions but not everybody. Charging full </p><p>commission is more prevalent with local agencies than with international </p><p>companies," she said. </p><p><BR><BR> </p><p>Adarco interviewed 17 managing directors of major advertising agencies </p><p>in Thailand, with the results indicating more difficult changes lie </p><p>ahead. </p><p><BR><BR> </p><p>The study said that in the past, finances were a simple case of charging </p><p>15 per cent commission on media. </p><p><BR><BR> </p><p>The volume of business allowed agencies to develop additional services, </p><p>providing more than just creative development and media buying to </p><p>clients. </p><p><BR><BR> </p><p>These services were incorporated into an account, but were rarely priced </p><p>separately and never given real value. </p><p><BR><BR> </p><p>With the recession, agencies were put under pressure from clients to </p><p>reduce the commission percentage charged on media. </p><p><BR><BR> </p><p>Some clients turned to buying their own media, using agencies for </p><p>creative development alone, but only acknowledging commission on third </p><p>party costs, not payment for the generation of ideas. </p><p><BR><BR> </p><p>The emergence of media specialists has wrenched more media volume and </p><p>income away from full service agencies. </p><p><BR><BR> </p><p>While remuneration methods other than media commission are beginning to </p><p>appear in the form of fee payments and compensation by results, there is </p><p>still a lack of knowledge on how these systems operate and reticence by </p><p>agencies and clients to change billing and payment. </p><p><BR><BR> </p><p>The requirement for a greater degree of transparency in accounting </p><p>systems and sharing of information is thought to be one of the major </p><p>reasons why these fairer payment systems have not been introduced more </p><p>quickly in Thailand. </p><p><BR><BR> </p><p>As agencies no longer needed to negotiate on volume to buy media, media </p><p>specialists saw this as a green light to enter the Thai market, which </p><p>was previously closed to outsiders. </p><p><BR><BR> </p><p>More than 10 media specialist companies now operate in Thailand, where </p><p>there were none, 18 months ago. </p><p><BR><BR> </p><p>Agency profitability has taken a dive, particularly because of the </p><p>reduction in advertising volume and never before has the industry been </p><p>under so much pressure or faced so many challenges. </p><p><BR><BR> </p><p>Adarco concluded by saying that despite initial negative feedback, most </p><p>agencies were in agreement that higher professional standards brought in </p><p>by media specialists could only be a long-term improvement for the </p><p>industry. </p><p><BR><BR> </p>