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Five reasons why agencies resign business

24-July-2012
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Five reasons why agencies resign business

In the cutthroat ad world, agencies can paint the moon to lure a client and then really bend backwards to retain the business. This is true for not just agencies in India, but world over. When ‘clients’ are the basic income for an agency, the mandate largely is to ensure the business stays, while attempting to add new businesses at all times, thus leading to organic and inorganic growth. But there comes the not so common occasion, when an agency has to bid adieu to business. And it is a tough call to make.

The CEO of a leading media agency, on conditions of anonymity, remarks to exchange4media: “There are times when we have invested from our own pockets to support a client, but what is the point of continuing with a business which becomes a liability instead of giving returns?”

Conversations with some of the leading agencies reveal that there are several crores of rupees that agencies had to forgo as bad debt in the past. Even today, there are various examples where clients haven’t paid agencies for several months and have now moved on.

To quote a few – a famous Delhi-based food chain hasn't paid its creative agency for the last eight months and now the two have parted ways. A media holding company had to let go of a handset business due to non-payment of dues for over eight months. Earlier in the year, we had seen a media agency resign business of a confectionary and snacks company – the reason was incompatibility between the two teams.

One of the problems faced by agencies is that despite the strict guidelines from industry body AAAI (Advertising Agencies Association of India) for thorough checks before partnering with a client, pressures to acquire a business are so high that agencies often justify working with a company that may have been resigned by its earlier agency for reasons such as non-payment.

“Agencies have to raise a flag at the right time, launch a formal complaint so that actions can be taken accordingly. The longer you allow a problem to persist, the more difficult it becomes to be resolved. We constantly advice industry players to take informed decisions while partnering with clients,” remarked Nagesh Alai, President, AAAI and Executive Director, India Operations, Draft FCB group, informing that the body works in close tandem with IBF (Indian Broadcasting Foundation) and INS (Indian Newspaper Society) to take actions on defaulting clients.

A senior source from a creative agency however divulged, “You eventually have to fight the case yourself. There isn’t much help available. Clients switch partners and then it is business as usual for them. Legal cases take years to resolve leading to more frustration. We are creative professionals and not recovery agents so it becomes very difficult to recover the money back.”

Agencies have found solutions over a period of time, though for some, the solution has been to cut losses and move on.

Five Reasons, to say – Sorry, Good-Bye…

Agencies have various reasons to let go of a business, but here are the top five that lead to the unhappy parting of ways

Payment Blues: Non payment of dues is the top reason for agencies to resign a business. Experts advise that it is wiser to raise alarm at the right time rather than wait and suffer. “We are not here for charity. This is business and regular cash flow is crucial,” is what agencies say.

Incompatibility between teams: Advertising is a people business. At the end of the day, there are people handling the client side and representing the agency side and it is this team work that can give great results or create complete disaster. When client starts taking an agency’s time and ideas for granted or when the chemistry is just not right, it’s better to end the relation quickly than prolong an unhappy co-existence.

Changing pressures of terms and conditions: Agencies also leave clients when the terms and conditions of business are no longer viable. ‘Unlimited liability’ that asks an agency to pay for a fault that has happened from a third party vendor has been a put off for many. Looking for more from the same can be a deal breaker too. In the past, when a client has asked for agencies to cut down on their fee or commission citing recession, the situation has led to breakups.

The chance of a bigger business: Another reason for agencies to resign business is better prospects. If a bigger brand in the same category calls for a pitch, and there are fair chances for an agency to win, or it has already won, it parts ways with the existing client on ground of a business decision for growth.

International diktat: Last but not the least, agencies part of a larger network may have to resign businesses in local markets in case of a global alignment that forbids servicing competing brands.

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