Ad experts differ on service charge
The call for advertising agencies to cut down on their service charge to advertisers has continued to raise controversy in the advertising industry as experts strongly disagree over the issue.
Some of them are of the opinion that advertising agencies should buckle down on their fees irrespective of the nature of such fee because the country was going through recession which is affecting everybody especially the advertisers.
They argued that if advertising agencies kept their fees and service charges high, advertisers could be forced not to advertise anymore or further cut their marketing budget, which could hurt the industry even more.
According to global industry standard service charge is about fifteen percent; however, it is open to negotiations between the advertising agency and its clients depending on their relationship.
Managing Director, SO&U, Mr. Udeme Ufot, who is one of the advocate for reduction in charges, hinged his decision on the fact that most companies were going through hard times in the midst of the economic crisis.
Ufot added that at times like this, advertising agencies should bring down their cost of advertising and service charges, stressing that advertising businesses could be lost if the firms kept charging exorbitant amounts at a time when most clients were actually cutting cost.
According to him, “We are in a very dicey situation and all I can advise my fellow practitioners are to buckle down. Our clients are cutting cost, and we are still keeping high on our cost. What we are facing right now may actually get worse”
Also speaking in support of the idea is Co-Founder/CEO, Hot Sauce, Mr. Dayo Adefila, who said that agencies were not expected to act the same way they used to act during a pre-recessionary period, stressing that he believes that agencies could build stronger relationship with their clients by the services they offer to them including reducing some of their charges for clients.
Adefila noted that advertisers were more pressed in this recession period to deliver more value with fewer funds, adding that agencies should look out for ways to create and make their service fee more affordable for clients to advertise.
He said: “we, at Hot Sauce also offer our clients what is called value in kind sometimes, you know, we also recognized that the normal standard is for you to charge for certain services, so sometimes we can wave one or two in-house cost, so it does not mean that we are going to do the campaign for our clients at zero cost”
However, Associate Media Director, Vizeum Nigeria, Mr. Promise Oduh, said that reducing the service charge fee would be a win-win situation for the advertisers, stressing that, advertisers should know that the agencies also have cost and overheads to bear.
”Only very few agencies are on retainer and the retainer fee are highly bided, highly competitive to the extent that most agencies are collecting only one percent, can one percent pay salaries, even if it is two percent, can two percent pay salaries? And this is after, you have given back to the advertisers all the discounts, all the commission and the clients pays you one percent services fee or two percent as retainer fee.
“Agencies are going through though times because a lot of agencies are closing g down, shutting down, some are owing salaries for months, how do you want the agencies to survive, some are sacking and reducing staff strength, so I think it should not be a win-win for the advertisers, they should also come to a level playing ground with the agencies and let us agree on best practices.
“The advertisers should just realize that agencies are also supposed to survive, pay salaries and they have cost to bear, it should not be a master servant relationship, you know the agencies are bringing value, the clients are bringing value, so they should go back and agree on what is mutually beneficial to each of them” Oduh added.
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