Integrated marketing communication (IMC) – which includes advertising, public relations, brand management, experiential marketing, media buying and media – is struggling in Nigeria to match profits in South Africa, Ghana and other emerging markets.
Investigation showed that the alleged payment policy of corporations, particularly multinationals, and unfriendly bank loan facilities erode the entire margins of agencies.
Agencies, suppliers and government contractors are groaning under a 90-day, and in some cases 100-day, payment plan adopted by almost all multinationals in telecommunication, home appliances and gadgets, manufacturing, and pay television.
Why outsourcing
Outsourcing is a strategy by which an organisation contracts out functions to specialised service providers who become business partners. Sometimes it involves the transfer of employees to the outsourcing company, but that rarely happens in Nigeria.
Companies outsource to reduce costs, improve focus, gain access to world class capabilities, and free resources for other purposes. It is also adopted to share risks with partner companies.
IMC in corporations is the most outsourced function in Nigeria, hence the explosion in the number of agencies in advertising, public relations, experiential marketing and brand management.
Creative advertising has 75 registered members, public relations (100), experiential marketing (65). There are other allied businesses.
Undue advantage
Corporations have taken advantage of this plethora of agencies to implement a policy that is not mutually beneficial to them and suppliers.
Stakeholders decry the lopsided business relationship between corporations and agencies, particularly PR practitioners treated as ‘errand boys’.
BD Consul Managing Director, Tola Bademosi, said an agency is treated the way it portrays itself, saying, “I have never been treated shabbily by my client because I am a professional.”
Nonetheless, others complain about disrespect because too many agencies chase few businesses, resulting in unprofessional and unethical practices.
Some make unthinkable concessions to win a contract without considering the repercussions.
90 days’ palaver
From Samsung to MTN to Oando to Nestle, the rule is the same. It is either a 90- or 100-day payment period or no deal. In a market of two digit interest rate, a supplier is made to wait 90 days after the local purchase order (LPO) has been tendered before he gets paid.
The impact on business is huge, lamented EXP Nigeria Managing Director, Wole Olagundoye.
An agency has to have a huge cash outlay to work with all the multinationals.
“There is no upfront payment, an agency must raise the cash to get the job done and wait anywhere from 45 to 90 days to get paid. That is the biggest demotivation to the industry and I see it subsuming agencies,” he stated.
He advocated a review of the remittance period to enable local agencies compete with their global counterparts.
Nigerian factor
However, some stakeholders who did not want their names in print explained that the unwritten rule came into effect when suppliers began to exhibit unprofessional conduct.
“It was not like this until most of them began to elope with the mobilisation fee without doing the job or some delivered substandard performance with the believe that the money won’t be collected from them. Clients had to change strategy to nib that in the bud,” a marketing director of a multinational recalled.
Yet, Olagundoye is critical of the policy and its impact on business.
His world: “They believe it is the way to ensure that service is delivered as agreed.
“But the way I see it is that you need to look for professional agencies that can deliver and ensure they get remunerated appropriately and in time so that they can keep the right talent and that talent can blossom to even give more to the client.”
Corporations have stuck to their guns despite the fact that the industry has divided itself into groups such as Experiential Marketers Association of Nigeria, Association of Advertising Agencies of Nigeria, Media Independent Practitioners Association of Nigeria and Public Relations Consultants Association of Nigeria.
South African example
South Africa is a model in the African market, according to NF Branding Chief Executive Officer, Olufela Seton.
Seton, whose business has South African parentage, said it is illegal in that country to offer a contract to a supplier without paying at least 70 per cent upfront. This applies also in countries such the United Kingdom and United States.
The multinationals in Nigeria are criticised for double standards.
Samsung and MTN pay 70 per cent in advance in South Africa, but both refuse to pay a kobo in Nigeria until after 90 days, noted Bolarinwa Edun, a marketing communication expert.
Banking theory
Some stakeholders cautioned that multinationals are constrained in part by the harsh operating environment.
Adelabu Michaels, a mass communication lecturer at the University of Lagos, said “the financial system should be held responsible because the situation is made difficult by their two digit interest rate as well as unfriendly conditions tied to facilities.”
Gasping for breath
Many local agencies are on the brink of collapse. Some barely foot their overheads let alone pay staff salary while corporations sit on their funds for 90 days.
Seton urged the Ministry of Trade and Investment to reverse the policy to save jobs and raise revenue. Olagundoye asked Abuja to enact trade laws that protect local industry.
Other stakeholders warned agencies to desist from unethical practices that expose them to the whims and caprices of powerful corporation clients.