This post is by Darren Woolley, Founder of TrinityP3. With his background as analytical scientist and creative problem solver, Darren brings unique insights and learnings to the marketing process. He is considered a global thought leader on agency remuneration, search and selection and relationship optimisation.
With reports last week of over-charging of digital media by the Dentsu Aegis Network parent company Dentsu Inc, with one of their most significant and longest-standing clients, Toyota Motor Corporation of Japan, advertisers across the region need to reflect on their own media agency arrangements rather than to continue to ignore the issue thinking it is an isolated issue or one for the USA alone.
If this behaviour can occur in a market where trust and honour are such core concepts to business practice, between two such long standing business partners, then how can any right thinking person not believe it is happening elsewhere across the region?
Can marketers trust their media agencies?
The relationship between the agency and their client has traditionally been one of a trusted advisor or partner, and yet increasingly the facts are that the relationship is a commercial one where the agency has a responsibility to drive their own profits, seemingly at the expense of their clients’ best interests.
Too often marketers will automatically assume that the media agency will be acting in their best interests. But it is examples such as this where it is clear that the interests of the two parties are no longer naturally aligned.
Publicly listed companies have a responsibility to their shareholders to deliver increased profit performance both on the advertiser side or the agency. While the thinking was that if the advertiser grew the agency grew too, this is no longer the case in a world of procurement-led cost reduction and the short-term demands of quarterly profit reporting.
While the reports today are about the Toyota relationship in Japan, it is likely over the coming days and weeks; other Dentsu clients will be drawn into this situation. And when they are, their CEOs and the Board will hold marketers accountable for this situation.
Are the media agencies to blame?
To point the finger at the agency alone is to play the blame game, to admit that as a marketer you have simply placed responsibility for the investment of your significant media budget in the hands of the agency without the due governance it requires.
You have trusted the agency to do the right thing with that budget and they have let you down. Yes, trust is important to the daily functioning of the relationship between agencies and their clients, but trust is earned and maintained by meeting expectations and obligations too.
But if, as we have often found when assessing media agency contracts, these expectations and obligations are poorly defined or non-existent, then it is the responsibility of the advertiser to make sure they are defined and enforced in the most stringent ways.
This lack of obligation on the agency-side of the agreement has allowed many agency heads to say they have acted within the terms of their client agreements, because those agreements fail to define the agency behaviour as contravening the terms of the relationship.
Should you pitch your media agency?
The great conundrum facing marketers and advertisers is what to do. In the situation unfolding today it is likely that the long-standing relationship will survive with some significant work needing to be done by the agency to repair the trust and honour that has been lost.
In the US, following the revelation of the non-transparent kick-backs and rebates, many major advertisers immediately took their account to market which created a mediapalooza with billions of dollars in media up for pitch.
But going to market is not the solution because selecting the cheapest media agency offering available will most likely increase your chances of being overcharged elsewhere as the agency makes up their margins lost in agency fees.
Where is the industry leadership?
Instead, marketers and advertisers need to look at their current arrangements and make sure they have the right governance, accountability and transparency built into their agency agreements.
ISBA, the advertiser body in the UK has provided their members with a recommended media agency contract. The ANA in the US has provided guidelines and recommendations on how to achieve this to their members, but there has been very little in the way of leadership on this issue from the Advertiser Bodies in this region.
Perhaps now it is time for us to acknowledge that there is a problem here and start to address this as an industry. The media markets of APAC are not uniform, and each has its unique practices and issues. Therefore it requires application of some of these general global principles and some customisation for individual markets and business requirements.
What can advertisers do about this?
This news today signals it is time for action. If the relationship and trust with the media agency is broken then it is usually best to cut ties and move on.
This would mean undertaking a tender or pitch that excludes the incumbent and ensuring that in the process you put in place a governance and reporting framework with the new media agency to ensure transparency, performance and value delivery on your media investment.
Increasingly though we are recommending to advertisers who approach us to manage a media agency tender that they should undertake a process to assess the Media Transparency, Value and Performance of their current media arrangements from both an agency and advertiser perspective.
In this way you have an independent assessment of what is working and what is not working and what to do about it before going to market. In 9 out of 10 cases the advertiser does not proceed with the tender process as they realise there is significant improvement to be made in the current arrangements without the disruption of a tender.
The final and most risky strategy is to do nothing and hope that the whole situation goes away. After all, if the industry bodies responsible refuse to provide leadership and guidance on this issue for the region and the markets, then why should you?
But as we have seen over the past few years, more and more examples of the breakdown in the media agency / advertiser relationship are coming to light. It is up to individual markets to take the lead and make the changes that need to be made. Or risk being tomorrow’s headline in the next media agency transparency scandal.
An abridged version of this post first appeared in Mumbrella Asia on September 21 2016
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