Case study - Advertising

MANAGEMENT ISSUE: THE GREAT P&L TRADE-OFF

Every quarter you are asked by the agency’s CFO, “what are you going to do about Tres Picos? …We are losing money left, right and center on this account”. And every quarter, you say the same thing, “they let us do really good work and help us maintain a very high creative and new business profile”.

Tres Picos is a third-generation, family owned and operated tortilla company in Denver, Colorado and has been an agency client for about seven years. In addition to making and distributing tortillas for both the grocery and various restaurant/food service channels, the company has expanded into the salty snack and salsa categories. And while Tres Picos has a national footprint, they are positioned as a “local hero” and their marketing and advertising reflects this positioning. Tres Picos has been a client of DC&H for about seven years, and over the time the agency has consistently won numerous national and international creative awards for creative work; received numerous awards for campaign integration and effectiveness; gotten the agency a tremendous amount of coverage in “industry” press; and is one of the core, “go to” case studies in agency credentials and new business presentations.

But this quarter, the news from the CFO is even worse. Not only is the account forecast to have a negative EBIT of $82,000 for the year in the CFO’s currently quarterly forecast update, Tres Picos is currently averaging 81 days from the date of the agency invoice in settling their account for both agency fees and third-party suppliers. The CFO is not happy – the agency is losing money on the account, which of course is a drag on the entire agency’s financial performance, and the account is now running well past the contractual payment terms of “45 days from the date of the agency invoice”. And as the CFO storms out of your office, he says, “you’re the agency president … you need to fix this and you need to fix this NOW, as this simply cannot continue!”

Message received …now it’s over to you as the President of DC&H to address the situation. You pull a legal pad out of you desk drawer and you line out a “SWOT” matrix. Write up what your “SWOT” for the Tres Picos account would be. Now, based on your “SWOT” analysis, what management actions would you take or decisions would you make regarding the Tres Picos account?

And make sure your submit your “SWOT” analysis (and it can be handwritten) for the Tres Picos account with your D2L upload. Thanks.