Random acts of decency emerge as marketers speed up payments to smaller shops
Despite the pandemic bringing out the worst in some people and the continuing push by marketers to stretch payment terms with their agencies, random acts of decency are popping up by some marketers who are speeding payments to smaller shops.
Actually, the acts aren’t entirely random. They appear to have become de facto permanent policy for some marketers, without an expiration date linked to the end of the pandemic or related economic downturn. But the softened terms for now only come from a handful of packaged-goods marketers and aren’t being offered to holding-company shops whose parents have plenty of cash, or the means to get it.
Consultants identify Unilever, Mars and Clorox Co. as companies that, since March, have notified marketing-services shops, either formally or informally, that they will cap payment terms at 60 days for small and medium-size agencies and other suppliers. Procter & Gamble Co. has said it will consider expedited payments on a case-by-case basis. All of the marketers have previously shifted payment terms more broadly to as long as 90 to 120 days.
And there is indeed some randomness. The companies haven’t pinpointed exactly where they draw the line on “small and medium-sized,” so you only tend to know you qualify if you’re told.
Also, unlike with other areas of philanthropy, this is one where companies have no interest in telling the whole world about their good works. Spokespeople for Unilever, Clorox and Mars either declined to comment or didn’t respond to requests for comment.
John Gleason, principal of A Better View Strategic Consulting, says Unilever, Mars and Clorox appear to have been considering the 60-day cap before the pandemic but implemented it after it began.
Mars announced the move in a March 5 message that said: “Moving [small and medium-sized enterprises] to extended terms doesn’t feel in line with our Mutuality Principle, given the negotiating power imbalance,” adding that the 60-day cap applies in Canada and the U.S. and would take effect March 23.
Unilever publicly announced in March that it was offering more than $500 million in cash-flow relief, “including early payment for our most vulnerable small and medium-sized suppliers to help them with financial liquidity.” The company told agencies in April about its 60-day cap on payment terms, Gleason says, though it has declined numerous requests from Ad Age to clarify details.
Clorox similarly notified small and mid-sized shops in April about its own 60-day cap on payment terms, Gleason says. Nancy Hill, principal of The Agency Sherpa consultancy, confirms the policies communicated by Unilever and Clorox.
“I’d like to think that this is a sign that there’s humanity left in the ecosystem,” says Hill, former president of the 4A’s, “and that marketers are realizing that what they do can hurt the smallest of us.” She adds that she doubts payment leniency will be applied to holding companies at any point, and that marketers “don’t necessarily want to make it seem like a policy.”
Hill notes that other companies that haven’t issued any kind of statement to agencies, such as P&G, may still be willing to pay faster as needed, which is often necessary because small shops simply don’t have the cash reserves that big ones do.
An executive with a marketing-services shop noted that P&G also offers factoring loans negotiated with a third-party lender at attractive interest rates of under 1 percent, below what small firms generally can get on their own.
“What I’m saying to people is that you should certainly ask, because if you don’t ask, it may not happen,” Hill says.
Even when a company’s finance or procurement departments won’t bend on payment terms, there may be some hidden flexibility, Dan Jeffries, founder of Jeffries Consulting, said during a workshop at the Ad Age Small Agency Conference on Monday. In some cases, he said, marketing executives may let small agencies invoice a month early—in advance of work being completed—“to turn 60 days into 30 days.” This, however, is decidedly not policy, and likely frowned upon by finance and procurement departments.
The generosity isn’t limited to marketers, by the way. Curiosity, a small Cincinnati agency, recently prepaid a production company for a project that hadn’t even been booked yet, essentially to help keep a key partner afloat during lean times, says Greg Livingston, partner and chief operating officer.
Proof Advertising, Austin, has in some cases offered fee reductions or extended payment terms to clients in hard-hit sectors like travel, said Ly Tran, associate partner and chief media officer, during the Ad Age Small Agency Conference on Monday.
But consultants caution any agency considering kindness that some of the marketers currently seeking fee or payment term relief aren’t particularly hard hit by the pandemic or recession. And 4A’s president Marla Kaplowitz noted in June that many “temporary” concessions granted at the outset of the Great Recession became permanent when it was over, so they should be noted in writing as temporary in contracts.