Marketing Math Blog

The Best Way to Involve Agency Affiliates on Client Business

By Advertisers, Advertising Agencies, Related Parties No Comments

MarketingThe world’s four largest agency holding companies generated over $47 billion in annual revenue. Each of these organizations owns dozens of agency brands, specialty service firms and media procurement, marketplace and or platform providers.

Part of the success of the agency holding companies in fueling organic revenue growth in recent years has been their ability to involve these specialist firms on their branded agency client businesses.

The use of affiliates is certainly advantageous for the holding companies and can be beneficial for clients seeking to have a coordinated, comprehensive marketing communications program administered by a lead agency.

While there may be efficiencies that accrue to advertisers, unchecked there is an equal likelihood that they may be paying a premium for the use of agency related parties. Why? Because affiliate goods and services are often proffered without client knowledge or consent and may not have been competitively bid to determine value relative to marketplace alternatives. Further, affiliate remuneration is often blind to advertisers and can take the form of non-transparent, unauthorized mark-ups applied in addition to the fees and or commissions paid to the lead agency.

Many client/ agency agreements have specific guidelines for agencies seeking to involve related parties (whether the guidelines are followed), others don’t even address this important area.

The best approach for engaging affiliate companies is “full disclosure.” This includes having the agency notify the advertiser in writing of the opportunity to deploy theses resources on their business, specifying the nature, scope and cost of the work or product to be accessed and being clear on how the affiliate(s) is to be compensated.

In actual practice, advertisers often have no visibility into the involvement of agency related parties on their business. This is not an approach that we would advocate because it can undermine the agency’s fiduciary responsibility to its clients. Further, when advertisers learn of some of these arrangements it can lead to an erosion of trust and or confidence in the agency’s intentions and their responsibility to provide unbiased advice that is in the best interest of its clients. As it has been said: “a single lie discovered is enough to create doubt in every truth expressed” and no agency should want to raise the specter of doubt with any client.

Sound contract language regarding the agency “supplier group,” the process for involving related parties, their obligations under the agreement and the attendant level of compensation can go a long way in mitigating these concerns. This creates the opportunity for a proverbial “win-win” situation where both advertiser and agency can truly benefit from this practice.

 

 

 

 

Happy New Year!

By Advertisers, Advertising Agency Audits, Client Agency Relationship Management, Marketing Accountability, Supply Chain Optimization No Comments

Happy New Year 2022With the onset of 2022, we want to extend our thanks to our clients and friends for your continued trust and readership. We have truly enjoy working with you and sharing our experience and insights as they relate to the advertising industry.

The entire team at AARM looks forward to further collaboration and communication in the New Year.

Below are the links to the “Top 5” stories that we published in 2021 as determined by our readers. If you haven’t already seen these articles, we hope that you will enjoy reading them now.

All the best in the coming year. Cheers.

  1. Agency Audits: An Advertiser “Right” Not Yet a Standard Practice.
  2. Freelancers Are Not Employees – How Are You Being Billed?
  3. A Key to Rebuilding Client-Agency Relationships
  4. What Do You Know About Your Agency’s Use of Affiliates?
  5. Will Post-Pandemic Compensation Impact Your Agency Fees?

Can the Ad Industry Justify the Use of Programmatic Buying?

By AdTech, Brand Safety, Programmatic Buying No Comments

ANA Study on ProgrammaticWhich of the following two statements do you find most surprising:

  1. Only 30 cents of every dollar an advertiser invests programmatically reaches the consumer.
  2. More than 8 out of every 10 U.S. marketers use programmatic technology to purchase media.

The Association of National Advertisers (ANA) indicated that global programmatic spending “is on track to exceed $200 billion” this year. Further, it noted that PwC estimated that “more than 70% “of a typical advertiser’s budget “does not result in media that reaches the end consumer.”

Where does the money go you ask? According to the ANA the shortfall “factors in ad fees, fraud, non-viewable impressions, non-brand-safe placements and unknown allocations.”

These findings should do little to inspire confidence within the C-suite of any advertiser organization. The alarm bells should be going off when one considers that more than 50% of an advertiser’s spending goes to digital media and that the majority of that is purchased programmatically. Add in the growing percentage of TV, radio and out-of-home advertising being purchased programmatically and the level of working media for most advertisers is seriously compromised.

Thus, while we applaud the ANA’s recently announced initiative to engage PwC, Kroll, and Trustworthy Accountability Group (TAG) to conduct an in-depth study of the “programmatic buying ecosystem” we continue to have reservations.

The reason for our apprehension? The lack of meaningful progress that followed the findings of the ANA’s 2016 study of “Media Transparency in the U.S. Advertising Industry.” This combined with the fact that advertisers continue to allocate a greater share of their ad budget to sectors of the media marketplace that are fraught with non-transparency and brand safety challenges, fraudulent activity and where intermediaries tack on fees that seriously dilute an advertiser’s investment.

We understand that the advertising marketplace is complex and rapidly changing. But there is no rationale for money being siphoned away from exposing an advertiser’s message to consumers.

It is our belief that the quickest way to address these challenges is for advertisers to publicly announce that they will be curtailing their programmatic ad spending until the requisite safety measures and processes are in place to safeguard their investment. Then, and only then, will media ownership groups, ad technology providers and media service agencies get serious about eliminating waste and improving efficiencies. In the words of the 18th century French writer, Voltaire:

“When it is a question of money, everybody is of the same religion.”

At a minimum, as good measure to vouch for the funds already invested, advertisers may want to seriously consider a combination of financial and media performance audits to fully understand how their advertising investments are being managed.

Improving Advertising Accountability

By Marketing No Comments

transparencyWith experience as both an agency account director and client-side marketing executive the topic of “accountability” has always intrigued me. Given the material nature of marketing and advertising spend, the estimated billing process employed by advertising agencies and the complexity of the supply chain the fact that the industry has never fully wrapped its arms around improved transparency and controls to protect an advertiser’s investment is mystifying.

 

In this excellent article from George Ivie, CEO of the Media Rating Council (MRC) he explores the mechanisms of accountability, standards, and verification. His key point: “Accountability does not restrict or confine the advertising industry; it makes the industry stronger” … Read More

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.

 

 

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.”

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

By Advertising Agency Audits, Contract Compliance Auditing, Featured, 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.

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

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.

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.”