|
 

Marketing Maestros

Industry Consultants Weigh-In on Media Rebates/Incentives

By Bill Duggan, Group EVP, ANA
Posted: Aug 21, 2012 12:00am ET

Media Rebates/Incentives Require Full Transparency” is a recently released white paper from ANA and Reed Smith. The industry practice of media companies providing rebates/incentives to agencies for referring or influencing client spending towards that media company, and then the agencies not reimbursing those funds to the client, has long been acknowledged as a common practice outside the United States. However, our recent work confirms that this practice also exists in the U.S.  

The white paper has sparked conversation among the advertising community.  Some leading industry consultants have weighed-in on our LinkedIn group and highlights of those comments follow.

Stephen Broderick, partner at Firm Decisions: The U.S. market is unique in that advertisers “have had sufficient warning” that media rebates “might be an issue” at some point in the future. U.S. advertisers really need to ensure there is transparency in how these rebates are being accounted for, as well as ensuring that they financially benefit from them. My extensive experience in this area tells me that most U.S. advertisers are NOT sufficiently covered contractually. Many advertisers often think they have it all covered, but contracts with omitted clauses or incomplete definitions or what may seem to be relatively unimportant “wording” or “phrasing” can often allow the agency to justify the retention of rebates or commissions that have been earned as a consequence of client billings.

Allan Linderman, president at The Linderman Media Group: Clearly, the two main issues are (1) potential lack of objectivity in media decisions and (2) hidden agency income. Since the foundation of most agency/client relationships is the agency's ability to bring value to the client by developing strategic plans and executing efficient buys, any potential compromise to this fundamental element is problematic and a clear conflict of interest. Accepting revenue from a vendor based upon recommendations for client spend borders on the unethical.

Morten Pedersen, chairman at glue2020: Surprisingly, few clients are covered contractually, enabling them to rightfully reclaim rebates. It hurts to see that so many client-agency contracts are outdated, based on agency templates (excluding key clauses, obviously), and simply not protecting the client well enough. As a result, it is a mistake to make advertisers believe that agencies owe them anything (this has been tried in various court rooms already), let alone think that agencies “need” to give full disclosure to clients if this is not specific in the contract.  Also, it is wrong to assume that rebates exist because of decreasing agency fees/FTE$. Even I remember some good times in the 80’s and 90’s where fees were not an issue (and the rebate system were very much working nicely alongside). Also, rebates are primarily managed independently of client-specific commercial arrangements (incl. fees), so it is a mistake to assume that they are directly linked (again, the specific client-agency contract may go deeper and set out specific T&Cs).

Michael Lay, chief executive officer at Advertising Audit International: For effectively assessing the media rebate issue, we recommend that the marketer start with an in-depth assessment of its agency agreement terms for ensuring contract clarity.  We believe it commences with the agreement terms between the marketer and agency, especially the contract language governing Discounts/Rebates, Compensation and Right to Audit.  Most “best-in-class” contracts include a Discounts/Rebates section in which all discounts and rebates are refunded to the marketer. For example: “All third party discounts, whether taken by Agency or not, will be credited in writing to the account of Marketer, within thirty days of the discount being offered, provided that Marketer pays Agency for such charges in a manner that allows, or would allow Agency, acting diligently, to receive the discount.”

Elliot DeBear, senior vice president at Active International: An agency, in the case of media procurement, is an agent dealing on behalf of one principal with another. Any rebate and/or cost reduction realized based on a client's spend should benefit the client. If the rebate, in and of itself, is cause to shift spending it must be done with full disclosure to the client. Period!

Steve Fajen, partner at  Drexler/Fajen & Partners LLC: When agencies were first birthed in the late 1800s they placed newspaper space. There were few (if any) rate cards then, so agencies made up a high rate, gave the newspapers less and then pocketed the difference. A blind commission, long since thought to be disreputable. When media buying services were first birthed in 1969 they assured clients they could buy time for little or no commission. They gave the client a high rate, paid the stations less and pocketed the difference. A blind commission, again thought to be a worst practice. By these standards pocketing rebates today is just another worst practice. When the major holding companies birthed the modern media agency in the 1980s the industry applauded the abandonment of these blind payments. No one should stand for putting the blinders on again.

Thanks Stephen, Allan, Morten, Michael, Elliot, Steve for sharing your thoughts and expertise!

 




Do Media Rebates/Incentives Impact Smaller Advertisers More?

By Bill Duggan, Group EVP, ANA
Posted: Aug 16, 2012 12:00am ET

ANA has received lots of feedback and comments on our recently released white paper, “Media Rebates/Incentives Require Full Transparency.”

Following a suggestion made by Brian Wieser of Pivotal Research, we looked at awareness of media rebates based on advertiser size of our survey respondents.  The results are quite interesting.  

This would suggest that smaller advertisers are more likely to be aware of rebates in the U.S. than larger advertisers.

When we shared this data with Brian, he said, “This makes a lot of sense.  I would actually assume that rebates impact smaller advertisers more.  That certainly is the case outside the U.S. as far as I’m aware.  Usually this is because they are less sophisticated or have less clout with their agencies.  I understand that in many instances outside the U.S. where the AVBs exist and there is a global client, all of the AVBs flow back to the larger advertisers (who may then in turn pay a fee for services) but the smaller ones don’t get anything back.  This also might explain why we don’t hear much about AVBs in the U.S.  If the AVBs are, for example, concentrated among smaller and often privately held media owners and the advertiser base that effectively supports those AVBs are those who work with smaller and privately held agencies, which would explain why we don’t see them in the public holding companies.”

Thank you, Brian, for those thoughts.  Our white paper suggested that (1) the entire benefit of media rebates belongs to the marketer, and agencies need to be completely transparent regarding any rebates received and (2) marketers should have clear language in their agency contracts specifying how whatever form of rebate made on their business will be handled or allocated.

We welcome input from others!

 

 

 

 

 

You Don’t Know What You Don’t Know

By Bill Duggan, Group EVP, ANA
Posted: Aug 7, 2012 12:00am ET

“You don’t know what you don’t know” is my new favorite saying.  Media rebates/incentives, state commercial production incentives, and agency trading desks are all issues that marketers need to know more about as all can impact their bottom line and marketing ROI.

Media Rebates/Incentives
The practice of media companies providing rebates/incentives to agencies for referring or influencing client spending towards that media company, and then the agencies not reimbursing those funds to the client, has long been acknowledged as common outside the United States. However, a recent ANA/Reed Smith survey confirms that this practice also exists in the U.S.

ANA/Reed Smith suggest that (1) the entire benefit of media rebates/incentives belongs to the marketer, and agencies need to be completely transparent regarding any rebates/incentives received; (2) marketers should have clear language in their agency contracts specifying how whatever form of rebate made on their business will be handled or allocated; and (3) marketers should consider periodic audits to ensure that unauthorized rebates/incentive activity is not occurring.

Contractual language should also be at both the agency and holding company levels to address “global” advertising arrangements and ensure the fair share allocation of total agency incentives/rebates, and outline the process to reallocate those dollars to a specific client.

The ANA white paper on this issue is titled “Media Rebates/Incentives Require Full Transparency.”

State Commercial Production Incentives
Many states now offer financial incentives to advertisers to shoot commercials in their states.  Although such incentives originated about ten years ago, more recently they have expanded to additional states and have become increasingly attractive to advertisers.  Savings can be quite significant, often ranging from between 15 to 30 percent of production spending in that state.

ANA’s position is that production incentive rebates belong exclusively to the advertiser, not the production company or the agency, as commercial production is funded by the advertiser.  Advertisers need to beware that production companies in particular are sometimes trying to lay claim to these dollars.

Importantly, contracts with agencies and production companies should be written to reflect the fact that any production incentive associated with the work covered by that contract is the sole property of the advertiser.

More details are in ANA’s position paper “The Found Money of State Commercial Production Incentives."  

Agency Trading Desks
Given the complex nature of digital advertising, there have been intermediaries between clients/agencies and publishers—namely ad networks.  The perspective of agency holding companies is that such intermediaries provide little additive value. Further, ad networks historically have had very high margins (perhaps as high as 70 percent).  Agencies sought to recapture a portion of that margin for themselves and their clients by establishing agency trading desks.

While trading desks can have many benefits (better targeting, richer insights, better ROI) there are critiques as well (lack of transparency, double paying, conflicts of interest, marked-up media, mandates, and rebates).

Clients need to be aware of and understand agency trading desks.  ANA continues to sense a lack of deep understanding, among most marketers, of agency trading desks.

Marketers need to have a transparent conversation with their agency(s) and understand if a trading desk is being used for their business. Understand the business model of your trading desk. Ask your trading desk, “How do you make money? What are the costs for service?  Do you mark-up the cost of media?

ANA’s white paper is “Agency Trading Desks, Basics Marketers Need to Know & Questions to Ask.”

“You don’t know what you don’t know” sounds a little bit like a Yogi Berra line.  Yogi is actually a pretty smart guy.  Advertisers are strongly advised to educate themselves on media rebates/incentives, state commercial production incentives, and agency trading desks.

What Clients are Saying About Media Rebates/Incentives

By Bill Duggan, Group EVP, ANA
Posted: Jul 31, 2012 12:00am ET

ANA, along with our outside legal counsel Reed Smith, recently released the white paper “MediaRebates/Incentives Require Full Transparency”.

The industry practice of media companies providing rebates/incentives to agencies for referring or influencing client spending towards that media company, and then the agencies not reimbursing those funds to the client, has long been acknowledged as a common practice outside the United States. However, our survey/white paper confirms that this practice also exists in the U.S.  Here are some of the verbatim comments from the survey from clients about media rebates/incentives.

Insights & Highlights from the ANA Digital & Social Media Conference

By Bill Duggan, Group EVP, ANA
Posted: Jul 24, 2012 12:00am ET

Last week ANA hosted our Digital & Social Media Conference in California and I took away a number of key insights and highlights.

Pete Blackshaw of Nestlé spoke about the importance of fundamentals and the need for there to be employee guidelines for social media.

According to Activision’s Jonathan Anastas, 95% of campaigns with a huge social media component also have paid media, in addition to earned and owned.  So social media on its own rarely builds a brand.

It’s not just fan count; it’s getting fans to talk about your brand.  American Licorice’s Michael Kelly looks at engagement ratio – the number of fans talking about the brand divided by their total fan count.

Learn from social media disasters.  Monitor social media, be prepared for negative feedback from customers, be pro-active, respond quickly, and respond via social media as any errors will be magnified in social media, says Doug Wood of Reed Smith and ANA’s chief legal counsel.

Collaborative content based on key consumer insights can even help build a traditional brand. Sally Lee, editor in chief, led a bold makeover of Meredith’s Ladies Home Journal.

Social media tips from the Bravo celebrity panel … Be authentic.  Be responsible.  Timing is important – determine the window when your posts will be most effective and determine how many posts are too many and therefore spam.

Christina Morrison of Intuit says that social media is about the money.  It’s a business and there is a need to tie social media activity back into revenue.

Smirnoff’s Michelle Klein and Wayne Arnold of Profero don’t believe a consumer like is an active sign of engagement, as it’s a bit lazy.  Consumers engage when there is a reward for participation—some type of physical reward to the end user.  For every digital reaction, Smirnoff wants to give a physical reward.

Narry Singh of Outfit7 (Talking Tom app) thinks that, when you make things silly, they become honest and disarming.

Corning (Lisa Burns) has proven that you can do long form video content on the web, as their 5½ minute video (from agency Doremus) has been viewed almost 20 million times.

The 3MS initiative (Making Measurement Make Sense) has three initial implementation priorities: (1) defining an impression via a shift from a served to a viewable impression; (2) establishing audience currency with the introduction of an online GRP metric, providing reach and frequency reporting of viewable impressions; and (3) standardizing classification of ad units by implementing a classification system and taxonomy for banners, rich media, and streaming video ads.

And kudos to Michael Donnelly of MasterCard for being such a terrific conference chair.

 

 

Your Brand in My Back Pocket?

By Caitlin Nitz, Knowledge & Research Specialist
Posted: Jul 20, 2012 12:00am ET

The design of the iconic New York City MetroCard has remained virtually unchanged since it was introduced in 1997. The MTA has decided to open up the front of the MetroCard to advertising for the first time. Want your brand in the hands of 8.5 million New Yorkers multiple times a day? Here’s your chance.Though be sure to consider that your logo will get stepped on, litter the subway tracks, fill trash bins, be used as currency, and accumulate in the bottom of desk drawers and purses all over the city. Hmm, that actually sounds like a pretty good deal.

 

 

 

 

 

 

 

 

 

 

 

 

Media Rebates/Incentives Require Full Transparency

By Bill Duggan, Group EVP, ANA
Posted: Jul 16, 2012 12:00am ET

The industry practice of media companies providing rebates/incentives to agencies for referring or influencing client spending towards that media company, and then the agencies not reimbursing those funds to the client, has long been acknowledged as a common practice outside the United States. However, a recent ANA/Reed Smith survey confirms that this practice also exists in the U.S.

Awareness of the industry practice of media companies providing rebates/incentives to agencies for referring or influencing client spending towards that media company, for the U.S. and then elsewhere in the world, is 28% and 32%, respectively. By rebates/incentives we are referring to money paid or volume discounts granted by a media company to an agency that are not reimbursed to the client.

In the U.S., television and radio were identified as the media where such incentives are most likely to take place. But all media identified in the survey — magazines, newspapers, online, outdoor, radio, television, and yellow pages — is believed to have some level of rebate/incentive activity.

For business here in the U.S., survey respondents overwhelmingly believe that agencies should not keep rebate/incentive dollars. Eighty-five percent of respondents believe that agencies should not keep any rebate/incentive dollars and should remit all such dollars to clients.

The majority of respondents (63%) also believe that agencies who accept rebate/incentive dollars from the media here in the U.S. may not be objective with their media allocation recommendations.

Thirty-four percent of respondents identified having specific language in their U.S. agency contract(s) stating that any rebates/incentives resulting from their business be returned to them in whole. One percent have language specifying that rebates/incentives be returned in part. Almost 40% don’t know or are not sure if their agency contracts have such language.

Thirty percent of respondents report that they conduct periodic audits to ensure that undisclosed rebate/incentive activity is not occurring with their agency.

Implications

Marketers need to be aware of this issue of media incentives/rebates and know that the practice isn’t limited to faraway places like China and Brazil — it is happening here in the U.S.

Barring any up-front agreement to the contrary, best practices suggest that (1) the entire benefit of media incentives/ rebates belongs to the marketer, and agencies need to be completely transparent regarding any incentives/rebates received; (2) marketers should have clear language in their agency contracts specifying how whatever form of rebate made on their business will be handled or allocated; and (3) marketers should consider periodic audits to ensure that unauthorized incentives/rebate activity is not occurring.

Contractual language should also be at both the agency and holding company levels to address “global” advertising arrangements and ensure the fair share allocation of total agency incentives/rebates, and outline the process to reallocate those dollars to a specific client.

This is an issue about transparency. Personally, I am surprised that media rebates/incentive activity, unreimbursed to the client, is happening here in the U.S. Clients need to be aware of this issue and have frank conversations with their agencies.  And agencies must be transparent with their clients.

The ANA white paper on this issue is available at www.ana.net/rebates.

 

 

ICANN vs. The World

By Caitlin Nitz, Knowledge & Research Specialist
Posted: Jul 10, 2012 12:00am ET

While ICANN’s expansion of top level domains has been an extremely unpopular move, the frequency of applied-for gTLDs can at least help solve some of the world’s greatest popularity contests:

.LOVE vs .WAR (7 to 0)

.SOCCER vs .FOOTBALL (4 to 2)

.WEDDING vs .DIVORCE (3 to 0)

.COWBOYS vs .INDIANS (0 to 1)

.WINE vs .BEER (3 to 1)

.ARMY vs .NAVY (1 to 1)

.DOG vs .CAT (3 to 0)

.ADULT vs .BABY (1 to 6)

.BASKETBALL vs .BASEBALL (3 to 2)

.NOW vs .LATER (6 to 0)

.BOOK vs .TV (9 to 1)

.TIFFANY vs .CARTIER (1 to 1)

 To see how these battles unfold and to read more about the ICANN “soap opera,” check out the Party of We’s insightful conversations

ANA Multicultural Excellence Awards Insights & Call for Entries

By Bill Duggan, Group EVP, ANA
Posted: Jul 10, 2012 12:00am ET

Recently the advertising industry recognized its best via the Effie Awards and Cannes Lions.  Congratulations to all the winners!  The industry awards next up are the ANA Multicultural Excellence Awards as the call for entries is now open.

The ANA Multicultural Excellence Awards celebrate the year's preeminent multicultural advertising campaigns. The awards were created 12 years ago to help raise awareness and recognition for the outstanding work being done in the areas of African-American, Asian, Hispanic, and LGBT advertising. This year's award recipients will be announced at the ANA's 14th annual Multicultural Marketing & Diversity Conference October 28-30 in Miami.

Just two years ago the conference offered a session that provided insights and best practices for developing great multicultural advertising based on reviews of past ANA Multicultural Excellence Awards winners and input from industry marketing and creative leaders.  Some highlights follow.

New Laws … And Who Designed that Outdoor Billboard?

By Bill Duggan, Group EVP, ANA
Posted: Jul 2, 2012 12:00am ET

There’s an interesting story on cnn.com titled “July 1 brings new, sometimes quirky laws.” 

Here are a couple of odd ones:

Relevant to the marketing and advertising industry, a new local ordinance in Virginia requires electronic messages on outdoor advertising to remain in place for at least eight seconds to avoid driver distractions.  I like that new law!

Today’s electronic outdoor billboards are terrific as the image quality is very good and they provide the opportunity to rotate multiple creative units.  But I do admit, sometimes the timing of the rotations can be too fast and that shortchanges the advertiser and is a distraction to the driver. Also, it's my personal opinion that billboard design is somewhat of a lost art – there are just too many outdoor ads with either too many words or type too small.

Now if only I could get an electronic message near a road construction site on route 208 in New Jersey to change that says, “Road construction to start on or about December 23.”  Why, on earth, has that not been updated more than six months later?  That’s what you call a driver distraction!


First  << 17181920212223 >>  Last (34)

About This Blog

To complement our two leadership blogs and build dialogue on the seismic changes happening in marketing, we launched Marketing Maestros. Our in-house citizen journalists will talk about everything from marketing technology to accountability and everything in between. This blog is written for marketers by ANA's marketers whose insights are drawn from the voices of the client side marketing community.