Earlier this month, it was reported by the British press that GlaxoSmithKline, the global pharmaceuticals giant, had asked its marketing services agencies to tithe back to the advertiser if they wanted to remain on the advertiser’s roster.
The multi-point program allegedly contained two provisions which have sparked a controversy within the advertising industry. The first involved asking roster agencies for rebates on 2013 work already performed and the second was a requirement that agencies make a bonus payment to GSK to remain on the roster in 2014. The Marketing Agencies Association (MAA) spoke out against the aforementioned tactics and a similar approach employed by Premier Foods earlier this year, calling for a “crisis summit” to discuss “counterproductive demands by advertisers” which would include client-side procurement heads, marketing directors, member and non-member agencies and the Institute of Practitioners in Advertising (IPA).
If there is a silver-lining to the controversy, it is that stakeholders on both sides of this issue come together to air their perspectives and to lay the groundwork for continued dialogue surrounding the appropriateness of certain supplier relationship management tactics imposed by advertisers on their agency partners.
Without casting judgment on the aforementioned advertisers or their respective “savings” initiatives, it is fair to say that there are consequences which will result from these actions that will impact advertiser and agency alike.
From an advertiser perspective, it would have been interesting to be the proverbial “fly on the wall” during the internal discussions between marketing and procurement when the nuances of this initiative were being hammered out. One would assume that the client-side marketing teams within GSK and Premier Foods were no more enthusiastic with the approach ultimately taken than their agency resources were when the details were shared with them.
If this is an accurate hypothesis, than what does that say to professional marketers about the environment within these two organizations and their regard for marketing’s role in managing their marketing services agency networks? In turn, what impact will those perceptions have on the two firms’ ongoing efforts to recruit and retain top-notch marketing personnel?
In an industry where procurement and their marketing stakeholders have been working diligently to establish the basis for a productive collaboration in the area of agency selection, remuneration and stewardship will there be a spillover affect? Or, to the extent that decisions such as this create “bad blood” between the two functions will that be limited to the organizations in question?
Agencies have been down this path before and they have choices, as difficult as they may be from a bottom-line perspective. Accept the terms being offered by the advertiser or reject them and forgo the opportunity to work on that account. In this scenario, the question may be less about remuneration and more about the impact on employee morale, the work product and agency culture when serving an advertiser who views the agency not as a partner, but as a vendor upon which it can impose heavy handed pricing tactics as and when it deems appropriate.
Based upon our experience, we would offer one cautionary note at this stage of the discussion. It would be wrong to paint all clients or all procurement professionals with the same broad brush, falling back on the “see, I told you so” refrain when it comes to procurement’s role in the marketing area. The tithing practices referenced above are not widespread. We are talking about a handful of advertisers in an industry where there are a myriad of “good actors” that embrace a fair and balanced approach to the issue of remuneration and the stewardship of their marketing agency partners.
Let’s hope that the light shined on this topic serves to advance the relationship between procurement and marketing in working together to achieve their organizations pricing and expense reduction initiatives in a more even handed manner.