Payment Terms for Marketing Services Have Been Extended [STUDY]

A new ANA (Association of National Advertisers) study entitled, “Payment Terms – Current Practices for Marketing Services,” reveals that 43 percent of marketers have extended payment terms this year on at least one marketing service in their portfolio. That portfolio includes agency fees, research, media, production, and talent payments.

Key study highlights include:

•     17 percent of marketers have shortened terms on at least one marketing service
•     Across the multitude of marketing services in their companies, 90 percent of marketers have left at least some payment terms unchanged
•     Looking to 2014, 42 percent of respondents said they were somewhat or very likely to change payment terms.

A substantial majority who extended terms have done so with the primary objective of improving corporate cash flow. Those changes came with implications:

•     Strained vendor relationships (57 percent)
•     Higher prices (25 percent)
•     Strained management processes (23 percent)

Among those companies that instituted payment terms changes, about 60 percent did so for company suppliers across the board – and not just those in the advertising and media space. Forty percent implemented changes to just a segment of their supplier base.

The two primary drivers of payment term changes are:

•     The Finance department and / or CFO (86 percent)  
•     Procurement and purchasing (52 percent).

“It is becoming very clear that payment terms are becoming increasingly important to the overall marketer / supplier relationship. Such considerations must now be integrated into the total compensation equation,” said Bob Liodice, President and CEO of ANA. “While the ANA does not recommend any specific term or practice, we do advocate better collaboration that advances the quality of the marketer / supplier relationship and the products and services delivered.”

This current study was conducted to determine whether recent headlines about term extensions were isolated or reflective of broader adoption in the industry. Ninety-eight client side marketers participated, with 62 percent of these being from procurement/sourcing departments. Respondents averaged 14 years of experience in advertising and marketing. Survey questions about “the past year” reflect a snapshot time-period between May 1, 2012 and April 30, 2013. Full results are available upon request.