Follow The Money: Rebate Management Cited As Biggest Factor In 'Trust' Between Agencies And Clients

Greater clarity on rebates and agency business models is key to the level of trust between brands and media agencies, according to a new survey by ID Comms, the UK-based media management consulting group.

The ID Comms 2016 Transparency Survey found that globally more than 70% of advertisers and agencies believe that the way an agency manages rebates is the most important factor in the level of trust that advertisers have in media agencies.

Rebates are a commonly accepted part of the media-buying process in many parts of the world, although there is ongoing debate about how extensive the practice is in the U.S. Some top adland executives including WPP CEO Martin Sorrell have asserted that the practice is not widespread here. Others -- notably, former MediaCom U.S. CEO Jon Mandel -- disagree. Mandel rekindled the debate last year with a presentation at a conference put on by the Association of National Advertisers.



And the ID Comms survey suggests that many U.S.-based agency people believe rebates are an issue. Some 67% of U.S. agency respondents to the survey cited “how the agency trades with media vendors” and “how the agency manages rebates” as the most influential factors in determining advertiser trust in their agencies.  And 81% of all U.S. respondents rated “how the agency makes money” as an important factor in the trust equation.  

The findings are based on responses from 140 senior executives at agencies and advertisers including marketers from brands spending an estimated $20 billion annually and responses from all the major media agency networks. The survey was conducted in February and March of this year. Sixty-five percent of respondents were based in Europe, 25% in the U.S. and 10% in the rest of world.

U.S. marketers were slightly more positive about the levels of trust they have in their agencies, with 61% describing current levels as “average,” 26% as “low” and 13% as “high.” By contrast, some European marketers were very negative, with 14% saying trust levels were “very low” and 22% describing them as “low.”

Agencies overall believe that the areas important to the level of trust that exists from their clients include “how agency group buying/share deals work" (62%) and “how the agency manages client data and uses it for decision making” (52%).

Both sides acknowledge the importance of establishing a trusted relationship between client and agency with the majority (77%) agreeing or strongly agreeing that a close relationship with external marketing agencies will “tend to deliver a stronger marketing performance.”

Agencies were more optimistic than clients about the future prospects for their client relationships, with 38% indicating a belief that they’ll improve.

Among clients, the outlook was more skeptical, with just 7% expecting trust to increase “a lot” compared to 15% for agencies. U.S. marketers were even more hesitant than their European counterparts, with 17% expecting trust in media agencies to decline “a lot” compared to 11% for European-based marketing executives.

“We want to show how transparency in its broadest sense, as a business principle, can deliver benefits for both advertisers and their agencies,” stated Tom Denford, chief strategy officer at ID Comms. “The challenge is that issues such as transparency in planning and data, all of which are critical to a trusting relationship, are overshadowed by advertisers' concerns around the business models that have been adopted by the big agency groups,” he added.

Denford continued: “An advertiser that has a strong and transparent relationship with their agency, including a transparent and fair payment model, best-practice contractual language that protects their interests and a clear view of how their budgets are traded by the agency is most likely to build a trusting partnership for the benefit of both parties, including longer tenure for the agency and an increasing willingness to reward them when they deliver business value.”

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