Marketing Math Blog

Aug 21
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Outdated Client-Agency Agreements Pose Risks to Advertisers

By advertising legal, Contract Compliance Auditing, Letter of Agreement Best Practices, Right to Audit Clauses No Comments

ExpiredWARNING: If the contract between your organization and its advertising agency(s) has an effective date prior to January 1, 2017, you may be at risk.

Not unlike fresh produce, dairy products, meat, medicine or even beer, contract language is perishable.

Seems far-fetched you say. Consider the ad industry is a dynamic, fast-paced business sector. One only need recall the breadth and rapidity of change brought on by technology advances and increasing levels of regulation in just the last four years:

  • April of 2016 – Europe enacts The General Data Protection Regulation (GDPR) governing how companies handle consumer data, forcing advertisers, agencies, publishers and intermediaries to implement business rules and guidelines to safeguard personal data and privacy.
  • June of 2016 – The Association of National Advertisers (ANA) publishes its North American Media Transparency study, leading to wholesale changes in contractual controls. As a result, nearly 2/3 of ANA members indicated that they would update their media agency agreements.
  • December of 2016 – The industry’s four largest agency holding companies involved in a Federal bid-rigging probe following allegations by post-production houses on the misleading use of rates they provided to agencies.
  • September of 2018 – The California Consumer Privacy Act (CCPA) goes into effect giving consumers more control over the personal information that businesses, including advertisers, agencies and publishers collect about them.
  • October of 2018 – The Federal Government informs the ANA and its members that the Federal Bureau of Investigation would be investigating potential misleading conduct and or deception between media holding companies and advertisers.
  • June of 2019 – Cybersecurity company, Cheq reports that advertisers will lose over $23 billion to ad fraud in 2019 alone.
  • July of 2020 – Year-to-date the European Union has issued over 300 fines to advertisers and publishers totaling more than $171 million for violating GDPR guidelines.

Each of these occurrences and numerous others has led to the need for advertisers to rethink their contractual controls in order to safeguard their organizations both legally and financially. In turn, this requires language enhancements and the addition of terms and conditions dealing with a range of topics such as privacy protection, data security, intellectual property ownership, transparency, audit rights and indemnification.

All too often, the contracts governing client/ agency relationships are slow to evolve, posing serious risks to advertisers. This in spite of trends such as the growth in the number of intermediaries, agency use of affiliates, expanding agency rosters, murky supply chains, brand safety concerns and the prevalence of ad fraud that pose risks to advertisers.

The thinking on items that were once considered “standard” within the industry, and therefore thought to be sufficiently covered in the context of agreement language can no longer be assumed. Advertiser expectations on topics such as; establishing principal-agent relationships, client-centric audit rights, requirement for full-disclosure in all dealings by the agency with affiliates and third-party vendors and limiting agency revenue to the remuneration described in the agreement and or appropriate SOWs must be reviewed and explicitly defined.

In our contract compliance practice, we have identified 3 key “triggers,” which if present, should incent advertisers to review and revise their agency agreements:

  1. The “effective date” of the current Client/ Agency agreement is more than 2 years old.
  2. If the parties utilized the Agency’s contract template as the basis for the agreement. These documents contain language that reflects the agency’s interest, not necessarily those of the advertiser.
  3. If an advertiser has “evergreen” agreements in place, but updates Statements of Work annually. Too often, while clients update the SOW, reviewing the contract for necessary updates is forgone.

The good news is that both the ANA and the ISBA have issued solid guidance in the form of framework agreements for use as a starting place to construct media and creative agency contracts. It’s important to note that while these broad-based agreements are an excellent resource, every relationship has nuances with new evolving risks that should be weaved into new advertising agreements.

Current, comprehensive supplier agreements leads to solid controls, improved transparency and stronger agency relationships. Integrate periodic contract compliance and financial management auditing and advertisers can rest easier knowing that they have successfully extended their governance and risk management framework to this important area.

“The essence of risk management lies in maximizing the areas where we have some control of the outcome, while minimizing the areas where we have absolutely no control of the outcome.” ~ Peter Bernstein

Jul 31
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Creative Development Post-Pandemic

By Creative Development, Creative Services No Comments

IdeasFew would debate that creative development services are one of the most critical skill sets provided to advertisers by their agency partners. Thus, as agencies the world over adjust to their employees working remotely it is natural to wonder how this dynamic will reshape creativity?

“Creativity is thinking up new things. Innovation is doing new things.” ~ Theodore Levitt

How, for example, will working remotely impact the gathering and imparting of knowledge, insights and inspiration between advertiser and agency? Between creative directors and their teams? Between agencies and their production resources?

The answers to these questions, and others, require multi-disciplinary inputs that will necessarily impact creative workflows and timelines. Whether in the context of the creative briefing and approval processes, creative asset management or the trafficking of finished work, advertisers and agencies alike will need to rethink the procedures that guide this process from end-to-end.

Once creative processes have been reviewed, mapped and guidelines issued, stakeholders must shift their attention to “execution,” which is central to successful innovation (doing new things right).

The first item to be addressed is the creative brief. Relationships in which advertisers and their agency partners had implemented and honed a solid briefing process, pre-COVID, will find themselves ahead of the game. Evolving the tools and procedures related to both the joint and internal agency briefing process is infinitely easier than creating them from scratch.

During the creative ideation phase, a remote working environment presents a unique set of challenges, the least of which is the collaborative process between creative leadership, art director, copywriter, content producer, etc. To this end, in a London Business School article by Richard Hynter the author mused about what the pandemic can teach us about creativity. This included his belief that practitioners will need to focus their orientation and efforts on three components of creativity; expertise, thinking skills and motivation. How agency creative management adapts its approach to address these areas will greatly aid and abet its creative development process… and outputs.

For most of us, it is likely that over the course of the last several months, we’ve logged more time on web-conferences, Zoom meetings and conference calls than one would care to. Welcome to the “new normal.” Along the way, we have experienced the subtleties of presenting data, proposals and yes, creative using these tools. While not ideal, being able to hone one’s skills to embellish the presentation of creative concepts is essential to secure client buy-in to an agency’s creative recommendations. How these presentations are staged, who attends and how feedback is shared will be critical to the creative approval process and, in turn, the development timetable.

Wash, rinse and repeat…

With client sign-off secured, ad agency creative personnel must set about briefing third-party vendors (i.e. production houses, illustrators, animators, digital video editors, etc.) to solicit proposals, begin work and to coordinate the ad production process. Managing the production workflow across multiple organizations, with employees working remotely will require adept project management and creative asset management skills along with a robust technology platform(s) to facilitate. Having a centralized creative file management system, will greatly assist the creative development, review, approval, tagging, delivery and tracking phases of the process, whether work is completed at the office or remotely.

Based upon casual observations of the creative that has been produced and placed since the onset of the pandemic earlier this year, agencies and advertisers have done an excellent job adapting to the new environment. Continuing to refine the processes already employed and implementing new tools and guidelines to assist a remote workforce will only help drive creativity on a post-pandemic basis.

Jul 29
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Keys for Optimizing Agency/ Client Relationships

By Advertisers, Advertising Agencies, Client Agency Relationship Management No Comments

KeysThe Agency/ Client relationship has been under duress for a couple of decades. The “Procurement Phenomenon” at the dawn of the new millennium has morphed squarely into the Procurement Era for Marketing Services adding stress to these important relationships. This has been further compounded by the erosion of trust resulting from media rebate and transparency issues that have beset the industry, and even more so as a result of the current socio-economic turmoil.

Join J. Francisco Escobar, a leading industry “marriage counselor” and Procurement consultant for a webinar that will cover current trends, compensation practices, a Procurement primer, and negotiation tips that will guide agencies and advertisers in optimizing their relationships. Key takeaways include the following … View Webinar

  • Key trends impacting ALL Marketing Communications Services
  • Top 10 ways to Demonstrate Value to Procurement
  • Practical negotiating  tips and best practices
  • Actionable keys to optimizing Client relationship
Jul 24
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Why Are Media Agencies Forgoing Objectivity?

By Digital Media, Digital Trading Desk, Marketing Accountability, Media, Media Transparency No Comments

questionConsumer media consumption behavior is ever evolving. And advertisers must select from an expansive array of content venue choices to communicate their messaging. Balancing these two dynamics is the key to optimizing media investment decisions.

Time was when agencies based their media resource allocation recommendations on insights gained from an exhaustive, objective review of media performance and audience delivery data. 

In traditional principal-agent relationships, agencies have a fiduciary responsibility to act in the best interest of their clients. This includes providing advertisers with informed recommendations, free of bias or conflicts of interest, that are advantageous to the advertiser. Most advertisers understand that in the twenty-first century, unless the principal-agent relationship is firmly established in the Client/ Agency agreement, all bets are off when it comes to their agency being bound to adhere to principal-agent guidelines.

Over the course of the last decade or so, practices such as “principal-based media buys” and ABVs (rebates) came into vogue. This is where an agency takes ownership of the media inventory and resells that inventory to the advertiser at a non-disclosed mark-up, making a profit on the spread and or receives an incentive based upon its total spend with a media seller. Good Client/ Agency agreements require the agency to secure the client’s written authorization before employing these type of practice and in the case of rebates to remit the advertisers pro-rata share of such rebates.  

Fair enough. Buyer beware. Trust but verify. Got it.

There is another practice that seems to be gathering steam between media sellers and media buyers that raises questions about the objectivity of an agency’s media planning and buying recommendations. Simply stated, media owners, seeking to lock-in a revenue stream from a given agency holding company, are offering to reserve inventory in bulk for that agency to allocate to its client base at some point in the future.

One recent example of this is Omnicom Media Group’s (OMG) commitment earlier this month to spend $20 million of its clients’ media funds to advertise in podcasts distributed by Spotify. Given the nature of the advertisers represented by OMG (McDonalds, AT&T, P&G, PepsiCo, etc.), their total media spend and the fact that 2020 media plans have been completed and buying commitments presumably made perhaps there is little risk of such a deal influencing whether or not an advertiser should commit dollars to Spotify podcasts.

Separately, it was recently reported by Digiday that TV networks and agencies, in an effort to jump-start the annual upfront marketplace, were considering share of spend deals to “address advertiser commitment issues.”  In this scenario, an agency holding company would commit to spend a percentage of its clients’ aggregate upfront budgets with select network groups. However, client budgets are in flux and there are multiple questions surrounding the traditional upfront marketplace. Thus, the commitments being made by agencies are being done in advance of any client media authorization process. It would be natural for one to ask; “What incentives are being offered by the network groups to facilitate such deals? And How are such benefits distributed to an agency’s clients?”

The primary concern with this type of approach is the potential for these buying commitments to bias an agencies recommendations to its client base. As the author of the Digiday article points out if aggregate spend projections come up short, the holding company may find itself in a position where it may “need to push clients to spend their money” with a given network group.

Practices such as these are fraught with risks. When an agency has already committed to a pool of inventory on a network group based upon hypothetical aggregate spend levels across its client base objectivity is lost.

We are simply not fans of this practice, believing that agencies have a fiduciary responsibility to their clients to make media recommendations, based upon an unbiased fact base, that are in the best interest of the advertiser.

 

 

May 28
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Budget Reductions Create Opportunity to Fine-Tune Agency Network

By Advertisers, Advertising Agencies, Client Agency Relationship Management, Marketing Agencies, Marketing Agency Network, Supply Chain Optimization No Comments

ad agencyFor marketers seeking to generate efficiency gains, looking internally to rethink the processes used to manage planning and creative development workflows can yield significant benefit.

As importantly, looking externally at “how” and “where” work is being performed across an organization’s network of marketing services agencies is extremely important. This involves an objective assessment of the current network of agency partners, their resource offerings, capabilities, performance, and the roles and responsibilities assigned to each.

Without periodic assessment, agency networks can become bloated beyond a marketing team’s ability to effectively manage these vital resources. This risk can be compounded in companies where marketing positions are vacant or have been eliminated as a result of a budget reduction decisions – leaving fewer client-side personnel to manage dispersed agency activities.

Reviewing and creating an inventory of roster agency capabilities and the roles assigned is never a bad thing when it comes to identifying unnecessary expenses or opportunities to consolidate resources and protect against redundancy. Amongst other benefits, since the work necessitates a review of each agency agreement and remuneration program tenets, output should include a comparison of agreement terms, conditions, requirements, and bill rates to ensure consistency (where applicable) and reasonableness of agency bill rates and other costs.

This practice is even more apt when marketing budgets are being cut and agency scopes of work reduced. Such assessments form the objective basis for eliminating duplicative activities and or resources, paring specialty agencies that are not being fully utilized, and eliminating unnecessary fees that are putting downward pressure on working dollars.

Consider; How many agencies do you have that are managing influencers? Involved with social media or content production? How many different agencies are being utilized for studio services or broadcast production? How many agency trading desks are being utilized for the placement of programmatic media? Are you utilizing specialist firms that may no longer be required based on changes to the marketing budget (e.g. event management)? It is highly likely that there are opportunities to consolidate work among fewer partners to simplify workflows, improve communications and reduce costs.

If you are utilizing a “lead” agency to coordinate activities, briefings, production and trafficking across your agency network, it may be worthwhile to solicit their input on potential agency roster moves. Further, once a plan is formulated, collaborating with the lead agency’s account team to affect transitions can be critical to the success of consolidations and the reshuffling of assignments. If you do not employ a lead agency model, the time may be right to consider this approach.

Streamlining external agency networks will improve communication between marketer and agency, enhance business alignment and instill clarity on success metrics. In the wake of current crisis driven budgetary adjustments and uncertainty, companies may want to give serious consideration to such an approach.

“Whatever the dangers of the action we take, the dangers of inaction are far, far greater.” ~ Tony Blair