ANA Targets Media 'Rebates,' Asserts Many Marketers Unaware Of Agency/Media Practice
- by Joe Mandese @mp_joemandese, July 17, 2012
LAGUNA NIGUEL, CA -- In a surprising development, Association of National Advertisers chief Bob Liodice used his opening remarks Monday morning at the ANA’s Digital and Social Media Summit here to warn about -- and rail against -- the practice of “media rebates” and other incentives that are paid to agencies for buying media on behalf of their clients.
Liodice said the essence of the ANA’s position was being released in a white paper, but said the practice was recently revealed to the ANA by a top board member, and said while it was generally understood and somewhat accepted overseas, it’s increasingly becoming a common practice in the U.S. -- “across all media,” including online and social media.
Although this is essentially an ancient practice in some circles, including the U.S. marketplace, Liodice said the ANA “just became aware of it," and implied that it is growing.
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He defined it as: “Money paid or volume discounts paid to an agency that are not returned to the client.”
He cited statistics from an ANA survey of 225 members indicating that 28% were aware of such practices in the U.S. and 32% were aware of it taking place overseas. He added that 51% of the respondents did not know it was taking place.
“This is a practice that we all need to become more aware of,” Liodice said, adding that “85% believe that agencies should not keep the rebate or incentive in the U.S.”
Liodice added that one of the biggest issues wasn’t simply financial, but about the “objectivity” of marketers’ agencies involved in business practices that reward them for buying some media over others. He called for “full transparency in the decisions” that agencies use to buy media on behalf of their clients.
Liodice said the ANA is recommending a couple of big changes in the way agencies oversee such practices, including that “your contracts should have extremely clear language to ensure that you have an understanding what whenever a rebate is made, it should be returned to the marketer.”
In addition, he said that clients should “audit” their agencies buying practices and that it is “absolutely critical” that they track when, where and how much their agencies are being rebated for buying media.
“This is happening across all forms of media, including digital and social,” Liodice noted.
Very interesting article. The practice certainly does call into question the objectivity of media buyers. Although financial incentives are common for intermediaries in many other industries, e.g. mortgage brokers, but are usually invisible to the clients. It's an issue when the client becomes aware of the practice and may result in the loss of a client, or said another way, transparancy and pass-through is a good way to win/keep clients.
Having been in the business long enough to deal with both the traditional and digital media, my personal experience has been that incentives and rebates are predominantly a digital phenomenon or practice. WHile lunches and outings were the "incentives" of the past, outright cash rebates were something I never encountered. Perhaps I was naive or not on the right lists or accounts. But I still believe, but can't explain why, that this is a more recent phenomenon. Other comments?
Having been involved in negotiating media agency contracts in the US (and globally) for some time now, it comes as no surprise that so few US-based advertisers are unaware of this practice (let alone how to cover themselves contractually).
This is a highly controversial area that requires special skills and expertise - and it calls for cool heads on both client and agency sides (all the way through to the holding groups which often sit outside the contractual client-agency relationship).
For a (free) 10-step plan to covering these specific elements in your client-agency contracts, we wrote a small piece which you can find here: http://bit.ly/KjVGD6
Internationally, media rebates have been standard practice for many decades (under several forms) - and experience tells that knee-jerk reactions will merely extend the pain for the unaware.
As always, Caveat Emptor
Morten Pedersen
www.glue2020.com