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Marketing Failed? You Still Have to Pay.

Marketers often assume agencies and vendors are 100 percent successful on all of our marketing initiatives. And yeah, our reputation is everything, so failure is not an option. If you're like many of us, you do everything within your ability to ensure success. The truth is, no one has 100 percent success every time. Unique situations always present themselves. Maybe your product or service just doesn't have enough value or the condition of the market changed. One thing is certain, unknown environmental factors, regardless of market research, will present uncontrollable variables that affect the outcome for every marketer's goals. It's not often, but it happens.
So what do marketing agencies and vendors do when a product or service doesn't sell? More often than not, we just take the hit. It's expensive, because when we understand what went wrong, we want to help fix it. When it still doesn't work, it's just lost time and revenue because the client expected the marketing to work and it didn't. So how much does it affect our industry? Nearly 6 percent of media revenue will be compromised due to non-paid invoices and it equates to $9.6 billion in revenue losses every year, industrywide. Printing, online advertising, social media, Web design, other direct response—we're all compromised, even the media giants.(The $9.6 billion came from our internal reports and approximations. We researched 10 large media companies' annual reports and 10Ks to establish losses.)

You do have to pay the marketing agencies and vendors you hire, though, even if you don't like the result. Because if you don't pay, those agencies and vendors will start taking steps to make you sign that check. Here's what they'll do:

Step 1: What Do Marketing Agencies and Vendors Do When You Don't Pay Them?
There are a lot of options they can employ to recover their losses. They first need to accept that they have debt, unless they charge 100 percent upfront. If your marketing agencies and vendors don't take full payment upfront, then they need to establish how they want to approach collecting the debt. I've owned an Integrated Marketing firm for over 13 years and used all these options listed below at one point or another in my company.

Step 2: You Say, 'We Don't Have the Money'
For $125, they can obtain a comprehensive asset report at www.CalculateRisks.com. They provide a profile on your company or you. I like to use this option because it gives me power. When they call you, they will already know your ability to pay and that's leverage. Also, if they decide to pursue you legally, their counsel will also know your resources and it will make it a worthwhile effort. I want to mention, taking the legal route is the most expensive and time consuming, and I find the best option is to negotiate a settlement.

Step 3: Your Marketing Agencies and Vendors DIY Collections
Statistically, they're only going to collect 20 percent of the debt if it's 90 days or more past due. So the longer they ignore the debt, the more they illustrate to you they don't care. They need to make collection calls and send emails at least every three days after an invoice is 15 days past-due to articulate to you that they are serious about collecting your money. Their dispute with you could be personal. You're most likely irritated, emotional and are not thinking like a professional negotiator. Keep calm. They should resolve the problem with incentives if they wish to retain you. Seventy percent of debt can be resolved with responsible communications in the first 90 days, based on our internal research. No one likes to call clients and ask for money and no company likes to receive a collection call. These factors are the reason most debt is forgiven in this industry. Recognize it's something no one wants to deal with, but it could be 6 percent of their revenue or up to 20 percent of their profit. If they are unsuccessful after 90 days, they may send it to a professional.

Step 4: They Use a Professional
Professional media accounts receivable companies will collect debt with no upfront fees. They will also typically pay for assets searches and legal. Statistically, 37 percent more revenue will be collected from you by just placing the item with a third-party media collection company, based on our internal research. Marketing agencies and vendors shouldn't use a typical collection agency from a directory or referral source, they should use a media collection company. MCCs will often collect 60 percent more lost revenue in half the time than a generic collection vender, based on our internal research. Not to mention, they won't have to explain what an SOW is or what line items mean on an invoice. (Opens as a PDF) MCCs just know media bills. I use www.revenueassistants.com for my collection accounts. I send them about $120,000 a year in client debt and they typically return 65 percent of my outstanding invoices paid. Media collection agency fees will typically be $5 to $30 flat for invoices less than 60 days past due. The range differs based on the number of accounts that are 30 days past due. (Marketing agencies and vendors who send accounts 90 days or more past due should expect to pay a 15 percent to 30 percent contingency fee. They are paid based on the amount they collect and the balance of the invoice.) Lawyers can cost a lot more.

Step 5: They Hire a Lawyer
This is typically the first option that comes to mind when a contract goes south, but it's the last option marketing agencies and vendors should use.If they are a large enough company to have legal counsel on staff, it's a great option. I found outsourcing legal counsel on balances of less than $100,000 not to be cost effective. It's better to outsource to a media collection agency for accounts ranging from $10,000 to 100,000. Most agencies will also have onsite legal counsel. When they outsource to legal counsel, marketing agencies and vendors again shouldn't think local. They might be in Hackensack, New Jersey but you're in California. So they use directory sites like Commercial Law League of America so they can locate legal counsel in the state where your debt resides.

Examples: Google
Google is a $59.8 billion online advertising network. They shouldn't have collection problems. Google AdWords, which is a pay-per-click advertising service, is quickly becoming the standard of today's online promotion. You simply enter a valid credit card, set a budget, and run expenses on your account. Google's 2013, 10K on SCE.gov shows its ad program makes up 92 percent of its $59.8 in gross revenue. In 2013, its accounts receivable was $1.3 billion, or 8 percent of net revenue.

Examples: Publicis Groupe
Publicis Groupe is the third largest communications group in the world, a $6.95 Billion Global Communications company that's recognizable by its ads for McDonald's and Lexus, had annual revenue of $6.95 billion and overdue receivables exceeding 30 days past due at $638 million or 9.6 percent of annual revenue, shows the FYE 2013 Annual Report (opens as a PDF). Communication specialist Publicis Groupe shares the risk with a company because of its experience and outstanding track record, but it's still exposed. Many communication companies are now demanding payment in full, up front.

Levon Vinton Moss is CEO at San Diego-based communication and business development services provider Vinton Moss. Reach him at This email address is being protected from spambots. You need JavaScript enabled to view it. or (714) 845-1900.

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