Marketing Math Blog

Nov 26
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The #1 Way to Improve Ad Agency Relationships

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

OneAs the year winds down, now is the perfect opportunity for advertisers to evaluate each of their advertising agency relationships. The goal is straightforward, to generate actionable insights that help improve client-agency relationships.

The recommended approach is to review and discuss processes and practices that are working well and those that can and should be improved… both at the agency(s) and within the client organization. While many advertisers have annual evaluation programs in place and some link agency remuneration to performance, this article can also assist those that don’t have a formal review process in place.

For optimal results, a 360-degree evaluation process is recommended. This provides both client and agency personnel a prescribed mechanism for providing objective feedback on the year’s results and the efficacy of the relationship. Typically, this process begins with both stakeholder teams completing a survey designed to evoke responses and stimulate thoughts on performance, workflow, and various dimensions of the client-agency relationship including a joint meeting between cross-functional representatives from both organizations to review survey results and discuss potential actions to facilitate the success of these assessments.

Topics to be evaluated typically fall into three key areas:

Brand Performance – Reviewing key metrics relative to a brand’s in-market performance is the principal lens through which each agency’s performance should be evaluated (sales, market share, lead generation, prospect conversion, share of voice, consumer awareness, etc.). That said, it is important to recognize that depending on each agency’s role, they will have varying degrees of impact on these KPIs. Thus, Brand Performance cannot be the sole basis for evaluating an agency partner’s performance.

Agency Service & Delivery – This is a category where an advertiser’s agency partners have significant control over outcomes and more heavily influence an advertiser’s perspective on agency performance. Areas to be reviewed include measures such as:

  • Knowledge of client’s business
  • Level of strategic thinking
  • Market knowledge and consumer insights
  • Quality and consistency of outputs
  • Responsiveness to client requests
  • Ability to anticipate client needs
  • Project management performance (adhering to deadlines, cost management, reporting)
  • Accuracy and timeliness of billings
  • Adherence to Master Services Agreement, particularly to transparency related rules

Client Processes & Responsiveness – An advertiser’s processes and agency stewardship skills have a large impact on agency performance. Given the goal of enhancing the efficiency of the overall advertising and communications process, feedback on client performance in areas such as the following can be critical to the effort: 

  • Timely access to key personnel and resources
  • Efficacy of the strategic briefing processes for creative and media
  • Efficiency of the internal approval process
  • Change management process
  • Approach to conflict resolution
  • Budget release and payment timing
  • Feedback on business outcomes and agency performance

Survey responses and the dialog during the meeting to review the evaluation summary should be objective, candid and focused on actions to be taken to improve deficiencies. Fault finding and one-way critiques leveled at an agency will do little to advance an advertiser’s desire to optimize these relationships. As noted, business author Ken Blanchard once said:

“None of us is as smart as all of us.”

To complete an advertiser’s agency stewardship efforts, layering in periodic contract compliance and performance audits that enforce an organization’s accountability efforts will further extend confidence and trust across its agency network.

 

For those just embarking on this process, both the 4A’s and the Association of National Advertisers (ANA) offer primers on the agency evaluation process and survey templates for use in gathering stakeholder feedback.

 

 

Oct 31
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One Good Reason to Audit Your Advertising Spending

By Advertising Agency Audits, Billing Reconciliation, Contract Compliance Auditing, Marketing Accountability No Comments

contract compliance auditingExperience from his early days in accounts payable brought home an important lesson…

I was recently talking with a friend, who retired as a senior financial executive for one of the large global airline companies. During our conversation he began to probe on AARM and our agency contract compliance and financial management audit service. While most finance professionals today came into the business long after electronic data processing (EDP) and payment systems came into vogue, this finance executive did not.

After we talked for a while about the nuances of agency compliance and financial auditing, he shared a remembrance from his starting position in the accounts payable department in the early ‘70s… prior to EDP. He recounted processing invoices from the company’s ad agency and the “stacks of paper” that accompanied their invoices. One of the nagging concerns that the finance team always had was whether the agency was reviewing the third-party vendor invoicing for both accuracy and to validate performance or simply passing along the documents. As a result, they implemented a policy that no invoice would be processed until the marketing team had reviewed and signed off on the billing detail. The goal was to encourage both the marketing team and the agency to examine the billing support for accuracy, rather than simply processing for payment. 

The estimated billing approach employed by most ad agencies used to be a paper-intensive process. Billing records not only had to be reviewed but stored and retained for at least 3 years. Thus, most advertisers waived the requirement for agencies to provide third-party vendor billing support with their bill-to-client invoices. Even with the advent of EDP and the digitization of records, advertisers were content to require their agency partners to retain the billing support and to make those records available for review if an advertiser chose to audit those documents. Today, if an agency invoice has been reviewed by a marketing representative and the dollar amount falls within the approved purchase order amount/balance the agency invoices are processed for payment.

Despite the size and material nature of marketing and advertising budgets, most organizations do not invoke their contractual audit rights to validate their agency billing support.

This reality evoked an interesting observation from my friend: “Processing payment, without a review of the supporting third-party vendor documentation is one thing, but to forgo periodically auditing those records is a classic example of blind faith.” His words, in turn, reminded me of a quote from rock legend Bruce Springsteen: “Blind faith in your leaders, or in anything, will get you killed.”

Oct 26
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It’s Time to Address the Biggest Risk to Your Ad Budget

By Advertising Agency Audits, Contract Compliance Auditing, Marketing Accountability No Comments

riskAs year-end draws near, many organizations are hard at work on 2022 planning. 

Significant effort will be invested in preparing next year’s internal audit plans, financial plans, operational plans, and marketing plans / budgets. The question is “Will any of these initiatives address the biggest risk to an organization’s advertising spend?”

When annual planning commences, representatives from internal audit, finance, procurement, and marketing are all proactively evaluating different mechanisms for driving performance and profitability, while mitigating risks to the organization.

Yet we know from experience that one of the best tools for doing just that, on behalf of a significant P&L line item, is likely not being considered.

Which P&L line item are we referring to? Advertising Expense. And the tool that simply is highly effective at mitigating risks and returning significant financial value is advertising/ media agency financial contract compliance audits.

The “Right to Audit” clause is a cornerstone control & financial protection in all client/ agency agreements. Further, organizations such as the Association of National Advertisers (ANA), World Federation of Advertisers (WFA) and the ISBA strongly recommend that advertisers routinely perform compliance reviews to maintain transparency and safeguard their marketing investment.

When a company’s control environment does not include detailed testing of advertising agency billings and costs – there are real risks that come into play for a few reasons. For one, client marketing teams are forward looking, focused on building brands and driving demand. Testing past financial activity is not necessarily on their radar. Secondly, agency finance teams are hyper-focused on their own profitability. And finally, the estimated billing process employed by ad agencies, takes client money upfront based upon projected expenses. In turn, these expenses are to be reconciled to actual costs once a job is closed. The long lag times for when this final accounting takes place and the lack of detailed billing support that is typically shared with the client creates risks for the advertiser.

The good news is that advertisers can proactively address these concerns and establish a compliance testing audit program that is cost effective, respectful of the agency’s time, and yields material near and long-term benefits, including:

  • Identification of past overbillings and financial non-compliance for remedy.
  • New contract language including industry best practice & agency reporting guidelines.
  • Financial efficiencies and cost savings tied to process improvements.  
  • Comfort in knowing that the organization has a full understanding and strong controls in place to manage one of its largest expenses.

Most importantly, the work helps to build an organization’s level of trust in each of its agency partners and an appreciation for the role that the agency plays.

Oct 25
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Google, Collusion & Anti-Competitive Practices

By AdTech, Digital Media No Comments

GoogleInteresting article revealing excerpts from the unredacted anti-trust law suit brought by the State of Texas (and others) against Google. Should anyone be surprised by these revelations? The question remains, how will advertisers voice their displeasure? Are they ready to rethink their digital investment resource allocations to demonstrate their unwillingness to pay exorbitant, non-transparent fees… to any intermediary? Clearly the federal government has concerns, as do other countries around the globe … Read More

Oct 01
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Reduce Your Content Management Risks & Costs

By Content Management No Comments

Content Management SystemsContent curation and production continues to grow in importance as marketers expand their message distribution to multiple devices across a myriad of channels including mobile, web, social media, shopper marketing, public relations, etc. The result is an ever-growing quantity of brand specific content that needs to be managed and shared.

For most marketers this content is being accumulated, produced, and stored by multiple of their marketing service providers. This can create logistical challenges when it comes to managing and accessing these critical assets, invariably creating risks related to compliance, brand consistency and usage rights violations while driving up operational costs.

The solution can be straightforward… a centralized enterprise-wide content management system (CMS) that improves a marketer’s ability to manage and protect this disparate set of images, videos, logos, and text files across its marketing agency network. Further, creating a content management “center of excellence” makes it easier to search, access, transform and distribute these assets in their proper format for use by each marketing partner.

The centralization of this function, whether in-house, with a designated “lead agency” or with a specialized CMS provider can boost productivity and improve both time and cost efficiencies. How? Eliminating the redundancies in labor and costs related to accessing content curation, creation, formatting and cataloging from multiple agency providers. This allows brand management personnel, and their advertising agency partners to focus on their specialty… “origination” rather than “adaption” projects.

Sep 30
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How Should Marketers View Digital Media in a Post-Cookie World?

By Advertisers, Digital Media, Media, Programmatic Buying No Comments

Third Party CookiesAs both government regulatory bodies and the advertising industry have become serious about data privacy, browsers such as Chrome, Safari, Firefox, and Explorer have announced safety measures that include restricting first-party cookies and blocking third-party cookies by default.

These moves will clearly have an impact on a range of outcomes, including user experience, data access, ad targeting and attribution. This will limit marketers ability to personalize content, target their advertising to individual users or assess which impressions had an impact on a consumer’s actions.

That being the case, how should marketers view the value of programmatic advertising in a post-cookie world?

For some, their focus has turned to first-party data for which consumers have given their consent. Yet, gathering this data and harnessing its value will take time. Further, this approach still requires an ad ID solution for which there is currently no standard or consensus among publishers, AdTech companies or device makers. That said, there is hope on the horizon as organizations such as the Advertising ID Consortium have emerged and are offering people-based identifiers that are compliant with “self-regulatory codes” and applicable privacy and security laws.

While the industry awaits a robust, unified ad ID solution, the loss of behavioral or deterministic targeting tools will clearly weigh on the efficacy of programmatic digital media.

According to Statista, global digital ad spend will reach $389 billion in 2021, with nearly 85% of that being place programmatically. In light of the challenges posed by the restrictions on third-party cookies, the question is, “Should marketers continue to allocate such a high percentage of their overall media spend in this area?”

In the words of 19th century author, Henry David Thoreau, “It’s not what you look at that matters, it’s what you see.”

Aug 26
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Will Post-Pandemic Employee Compensation Impact Your Agency Fees?

By Advertisers, Advertising Agencies, Agency Compensation, Agency Fee & Time Management No Comments

Remote WorkersWith COVID-19 vaccination rates increasing, organizations across the globe are evaluating whether and or when their employees will be required to return to the office. As part of the consideration process, many are deliberating on whether to allow all or select employees to continue to work remotely.

The question being assessed by employers considering extending remote work privileges is, “How will this decision impact employee compensation?”

Many organizations are weighing different pay scales for remote workers. As an example, Google is planning to adjust employee compensation based upon the local market wages where an employee works from. Which certainly seems like a reasonable trade-off.

By way of example, in a recent article by Reuters, which had seen Google’s “salary calculator,” an employee living in Stamford, CT, which is an hour from New York, would earn 15% less if they opted to work from home, rather than commuting into New York City. Of note, Google is but one Silicon Valley company that has implemented location specific compensation models for employees living and working in less expensive areas.

As advertising agencies evaluate their post-pandemic approach to the use of flexible staffing and or remote workers, it stands to reason that while some will opt for location agnostic pay models, others may implement location specific remuneration programs for remote workers. In the case of the latter, the obvious question is, “How will cost-of-employment adjustments impact the fees charged to advertisers?”

Will those on commission-based fees adjust rates downward? Will those employing direct-labor-based compensation programs reduce bill rates?

It is certainly reasonable to assume that if an agency reduces its salary and overhead expenses, that the fees charged to advertisers should be reduced accordingly. That said, it is likely that any adjustment to agency bill rates will need to be the result of collaborative discussions, initiated by the advertiser, between themselves and their respective agency partners.

At a minimum, location-based employee compensation adds an interesting dimension to the ongoing quest for a fair and balanced agency remuneration system.

 

Aug 25
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Do the Networks Owe You for Audience Delivery Shortfalls?

By Media No Comments

deliverables based compensationThis is an issue for advertisers. Audience deficiency shortfalls not made up in flight or earlier in the broadcast year create these types of problems. Advertisers really need to push their agency partners to be more diligent in tracking and securing compensatory media weight, rather than rolling these credit balances forward or accepting makegoods in streaming inventory as opposed to linear TV… where they were planned and purchased. Read Article…

 

Aug 24
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Advertisers Renew Focus on Working Media

By Advertisers, Media No Comments

costLooking for reasons as to “why” advertisers should monitor working media spend in addition to the myriad of other analytics utilized to assess effectiveness? Beyond the fact that eliminating waste is part of a marketing organization’s fiduciary responsibility to their enterprise, there is now another consideration for monitoring this particular productivity metric. While many in the ad industry eschew the concept of “working media” it is interesting to see the importance CEOs, CFOs and financial analysts place on this important metric … Read More

Aug 23
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What Do You Know About Your Ad Agency’s Use of Affiliates?

By Advertisers, Advertising Agencies, Related Parties No Comments

Line of SightDo your client-agency agreements require your agency partners to disclose their use of related parties? To secure your permission prior to engaging affiliates? To document how those affiliates are compensated?

If so, then you are in a better position than many. At a minimum, testing for agency compliance to such contractual requirements is an option that you can pursue. If not, the level of work being channeled to related parties by your agency may surprise you.

In our contract compliance and financial management audit practice, it is not uncommon to see 5 to 7 different related parties engaged by an advertiser’s agency. Examples of services provided by affiliates include items such as barter, programmatic buying, direct response TV, event marketing, principal-based buying and ad serving. Yet, oftentimes these affiliates and the manner in which they are compensated are not known to the advertiser.

Why should an advertiser care? For one, if work is assigned to an agency affiliate without undergoing a competitive bid process, what assurance can the advertiser have they are not being charged above-market rates? Secondly, the added profitability by recommending certain affiliates, such as those engaging in the procurement and resale of media inventory through principal-based buys or barter, could adversely influence an agency’s recommendations to the advertiser. And to compound matters, if said affiliates are also applying non-disclosed mark-ups to the media inventory procured or services provided, can an advertiser fairly assess whether the total fees the agency is generating from its business are commensurate to the services being delivered?

Thus, it is important to revisit contract language to ensure that the following controls are in place:

  • Principal-Agent language that requires the agency’s fiduciary responsibility is to the advertiser and that all decisions and actions are undertaken in a manner that maximizes benefits to the advertiser.
  • Require the agency to disclose any and all related parties that it intends to deploy on the advertiser’s behalf and to secure the client’s prior written approval. Requiring quarterly updates to this list would provide an added layer of protection.
  • For instances where principal-based buys, barter or other non-disclosed transactions are being considered, require a double opt-in process:
    • The first step would be a formal letter of notification from the agency to be signed by the advertiser granting permission.
    • Secondly, any purchase authorization form presented by the agency to the client for approval should reiterate the agency’s intent in this area.

With these agreement guardrails in place, advertisers can further protect their interests by periodically auditing the agency to validate compliance and verify the accuracy of charges made by and or for related party activities.

Ultimately, this approach will allow an advertiser to leverage the full breadth of its agency partner’s resource offerings in a very transparent manner, providing comfort that its agency’s practices are aligned with its expectations.