I’m being polite. The real point of this article is “Advertisers Beware.” After serving as an agency account director and client-side marketing executive, I thought I had heard it all. However, after becoming involved in marketing accountability consulting my eyes were opened… or so I thought.
Recently, a post by an agency media professional on a social media group to which I belong caught my attention. The two-part question had to do with: 1) Whether or not an agency buyer should request unspent monies back from the media; and 2) If so, was the agency entitled to keep those funds. What was surprising was not the question per se but some of the responses from group members, largely media buyers and sellers, suggesting it was appropriate for either or both of those parties to retain an advertiser’s unspent funds.
Either the advertising industry has lost its moral compass or there is an urgent need for training and education in and around agency and media stakeholders’ fiduciary responsibilities to the advertiser. As British philosopher and social critic Bertrand Russell once said:
“We have two kinds of morality side by side: one which we preach but do not practice and another which we practice but seldom preach.”
In our agency contract compliance auditing practice the need for education and a greater level of financial controls on the part of the advertiser is played out on a regular basis. It is not uncommon to identify aged media credits that are extremely old or to learn that prompt payment discounts, volume discounts or AVB’s that have been earned by the advertiser have not yet been “processed.”
For too many years the advertiser community has turned a blind eye toward many of the industry’s practices regarding agency and media use of advertiser funds. These include items such as the interest income earned on float and the retention of compensatory media weight. However, if there are stakeholders within various facets of the media purchasing cycle that are unclear about the need to return budgeted, but unspent funds to the advertiser than we should all take heed.
This is obviously a serious issue and importantly one where there should be no debate. The only answer to the aforementioned question is that media agencies and media owners have a fiduciary responsibility to their clients. Any unused funds, media credits, compensatory media weight for underdelivery, prompt pay discounts and or rebates should go back to the advertiser, plain and simple. Let’s remember, it is the advertisers’ money being invested, not the agency’s and not the media properties.
Further, on the topic of AVBs, policy action is required by the ANA and 4A’s as it relates to the growing use of volume rebates both globally and within the U.S. Advertisers should be reassured that their agencies are planning and deploying their media budgets in an optimal manner based upon sound, fact-based analysis tied to maximizing the advertiser’s return on media investment. The faintest specter of allocation decisions being skewed by the presence of an AVB offered by the media to an agency holding company is simply inappropriate.
However, as we all know, education and the enactment of industry policy takes time. Consequently, in the short-term the best way for an advertiser to monitor their marketing investment may be through the use of independent contract compliance auditing.
A good approach would be to begin with upgrading agency contract language to provide the requisite legal and financial safeguards to protect the advertiser’s interest on these topics and to incent all parties to conduct themselves in an appropriate manner. This would be followed by some combination of contract compliance monitoring, performance assessments, billing reconciliations and time-of-staff/ fee reconciliation reviews. In the end, this type of accountability program will both protect an advertiser’s interests and clearly communicate its expectations regarding “appropriate” behavior among its agents and 3rd party vendors when it comes to their financial obligations.
Interested in learning more about the benefits of compliance auditing as a means of improving transparency into your marketing investment and control over the stewardship of those funds? Contact Cliff Campeau, Principal at Advertising Audit & Risk Management at ccampeau@aarmusa.com for a complimentary consultation on the topic.