CHICAGO (AdAge.com) -- Marketing's new catchphrase: We'll pay you later.
A lot later.
General Motors and Anheuser-Busch InBev are among the major marketers that are asking advertising and media outlets to wait as long as 120 days to be reimbursed for production costs and media outlays, putting a painful burden on some shops. Many firms and trade groups are vowing to resist these changes, saying the companies are essentially bullying their media and advertising vendors into making them no-interest loans. But it's hard to know what they could do, other than walk away from the marketers in question.
A-B provided a taste of some of the battles to come when, earlier this month, it told all its client TV, radio, cable and other media-outlet partners that it would be taking 120 days to fill invoices going forward. It previously paid bills every 30 days.
In a letter dated Feb. 5, A-B noted its new status as the world's fifth-largest consumer-products company in the world, and it warned, "If you are not able to work with the change in payment terms, we may have to consider an alternative supplier."
'Egregious use of power'
That not-so-veiled threat angered agencies and media owners. "They're using the interest on that float to pay down their own loans," said Mary Collins, CEO of the Media Financial Management Association, an association of media outlets. "My members aren't banks. Running this campaign is going to create a cash-flow problem for them." In a letter to members, MFMA called the move "an egregious use of power being wielded in a difficult economic environment."
A-B has been converting all of its suppliers to the 120-day model, and holding on to cash longer will certainly spit off interest that helps the newly merged brewer service its $45 billion debt.
A-B said in a statement, "Our decision to adopt new payment terms for supplier invoices comes after a monthlong review of our global payment policies and ensures that Anheuser-Busch's payment practices are consistent with those in place globally for A-B InBev. The new terms will help us better manage our business."
The brewer is not the only mega marketer attempting to force such changes on its vendors. Cash-strapped General Motors recently shifted to a 70-day model that has inspired even greater vitriol from ad producers, who are required by labor law to pay their own crews within 10 days and can ill afford to float the cost of pricey auto shoots for seven times that long. Add to that the very real question of whether GM will be operating out of bankruptcy, if at all.
"GM is a prime example of going to something that is so ignorant and out of the norm that it shows that they clearly don't understand the business of advertising maybe almost as much as they don't understand their own business," said Matt Miller, president of the Association of Independent Commercial Producers. A GM spokeswoman said the changes were made to help the company operate more efficiently and transition to "new realities."
All of that figures to stiffen some backbones when it comes to marketer demands to elongate pay cycles. "As a small agency, we can't float the giant companies we are working for. They should float us to some level," said Mike Liebowitz, CEO of digital agency Big Spaceship.
~ ~ ~
Contributing: Jean Halliday