As a marketer, how would I respond to the recent ANA report regarding media transparency in the US?
OK, so I’d start to panic a bit. The flush would be starting by about paragraph two of the report. The palms would start to get clammy by para three and I’d be making a call by four.
are any of my agencies involved?
The recent research is truly alarming and, no doubt, I’d be looking at my own roster with a different perspective wondering if any of my agencies were part of the review. But even if they weren’t, the impression we’re getting is that the lack of transparency is (and more to the point, rebates are) rife. And it’s not just confined to one medium, but across TV, print, out-of-home and digital. The big holding companies AND the small independents are all in the firing line. The general impression is that as marketers, we’re being ‘ripped off’ left, right and centre. All those conversations around planning, budget meetings, reconciliation spreadsheets – what value do they hold now the whole industry has been ‘busted’? And to think when I was a client, we bought into the whole proposal around committing to one media supplier at the beginning of the year, to get cost efficiencies? Back then, no matter what campaign we were running, we nearly always used the same media sites. The feeling is one of violation and having been taken for a ride.
So, the first thing I’d do is speak with our procurement team and look at the contract. I’d go to the sections which set out margin, mark-ups and rebates. Having negotiated these and probably not looked at them again for nearly three years, I’d expect they don’t go into too much detail other than agreeing hourly rates of various account members and maybe ‘visibility’ of third party costs. Whether rebates are mentioned, or even broken down by medium, would be dubious. Given how quickly the landscape is changing, it’s doubtful we’d have been on the ball at this point. And given an agency pitch is a 6 month process at least, over and above the day-job, marketers always left the negotiations and minutiae to the procurement team. They knew what they’re talking about after all…didn’t they?
rebates or back-handers? The impact on trust.
And what can we do about it even if we do stipulate details around rebates? Are we even allowed to audit our marketing agencies? How often and by whom? Have we budgeted for this cost? Over what period of time can we go back to see how much money we’re due back? If any?
Countless telephone calls with the GAD may ensue: questions being asked about costs, suppliers, lots of raised eyebrows and suspicious, sceptical, conversations around future quotes.
in business to make a profit
…But saying that, isn’t that just business? Aren’t agencies allowed to make a profit nowadays? How many businesses do we encounter on a daily basis who are charging a margin which isn’t divulged to the end client? Isn’t sub-contracting and keeping up with an ever-changing landscape going to involve new entrepreneurial businesses and cost structures? Procurement teams don’t like to set up a new agreement for every supplier, so sub-contracting is inevitable, isn’t it?
And if it’s not a stipulation of the contract, is the agency to blame for not divulging all its secrets? The client has to take some responsibility for signing an agreement that only demands a certain amount of financial transparency. As a brand, should we pass all the blame onto the agency for not being 100% transparent if we haven’t asked them to be so?
the value of a good marketing campaign
Are we just creating more tension and potentially jeopardising the relationship we’ve spent years building with our agencies? Risking the outcome and performance of our marketing budget by counting (and accounting for) the pennies rather than looking at the ‘worth’ of a marketing campaign? If you’re happy with your ROI and your cost per lead or per sale, does it matter that the agency got a rebate on the good work they did by choosing a supplier who offered it?
what should we learn?
The ANA report is the tip of the iceberg, but as a marketer, I would use it as a lesson in procurement, contract negotiation and management as opposed to seeing it as a stick to beat your agencies up with. If you want to restrict your agencies to a set mark up or margin from your business, then by all means, screw down every paragraph in the contract to be as tight as it can be. But if you want to get the best from your agency, and let them spread their wings, be innovative and do the best for each campaign, then you need to set clear expectations and review mechanisms upfront, make sure they’re written down in the contract and then let them get on with it.
actively collaborate with procurement
Be vigilant, ensure your procurement team knows what it’s talking about and understands the agency’s full end-to-end business. By all means use a contract compliance auditor to verify the contract is comprehensive at the outset, is being adhered to, and make an annual audit a ‘business as usual’ activity. Don’t wait for the next industry report to arrive before you jump on it. All the recent coverage around transparency is not about cost cutting. It’s about building trust and creating better, more impactful, award-winning campaigns that increase a brand’s sales. Surely that’s the aim of the game, after all?