06 September 2012
The secret to a fantastic marriage between client and agency is a great contract. Nick Manning and Stephen Broderick explain how to ensure yours covers all the important issues.
A recent survey by the World Federation of Advertisers showed that nearly nine out of 10 advertisers are bemused, to put it mildly, by the inexorable rise of agency profitability at a time when they themselves are finding it hard to drive growth.
Privately, many advertisers say they have lost faith in their media agencies and what is seen as an inherent lack of transparency in the media market.
Their greatest concern seems to be that media vendor rebates can, and indeed do, distort the planning process. It is not unknown for media scheduling to be clearly driven by volume deals struck by the big buying groups. Frontline media agencies may be unaware of the nature of those deals but they know where they’re supposed to place clients’ money.
However both the question of transparency and the desire to avoid planning distortion can potentially be solved in one fell swoop, by having the correct contract. The right contract, supported by compliance procedures and audit rights, allows both concerns can be managed.
The agreement of a mutually binding contract should now be a ‘given’, even in an industry where contracts have often been seen as flexible, at least by the agencies. Contract compliance needs to become front and centre in the client/agency relationship, with associated compliance processes.
The centrepiece of these obligations should be the agency’s ability to demonstrate delivery of value to the client. And measuring the delivery of value needs to include the checks and balances that enable companies to follow the money through the transactional and invoicing process, even if the focus of the relationship is understandably on the launch of Product A or promotion of Brand B, rather than the ‘nitty gritty’ of who pays how much for what.
Too many contracts simply do not set out clearly enough the terms of billing, reconciliation, rebates, discounts and other basic deliverables. The result is that agencies can retain balances owed to the client, and those clients that do not audit comprehensively, remain none the wiser. Contracts need to specify a policy of regular financial reconciliations or audits.
The starting point for the contract, whether it’s a renewal or a new appointment, is that the contract must be client-drafted. Often, agencies will insist that clauses be inserted, clauses that appear innocent and straight forward but rarely are, and advertisers should be aware of the implications of such commitments.
The benefit of a clear contract is that any financial issues can be effectively dealt with in a sound working relationship; if they are not addressed and resolved, they can rapidly damage the relationship between the client and its agency partners.
Central to a successful relationship is a contract that ensures transparency and specifies regular and full compliance and financial audits. Almost all compliance audits uncover financial issues, ranging from a few thousand dollars to seven figures sums. An audit will put the issue on the table and when resolved, will often make the relationship stronger with greater trust between the two parties going forward.
Finally, clients should be careful to not just focus on their ‘visible’ agencies, such as their media and creative partners, but need to be applied to all partnerships, including third parties.
Like any chain, the client/agency bond is only as strong as its weakest link. For the marriage between an agency and advertiser to last, setting out the terms of that relationship clearly and concisely is essential. Detailing in advance how much visibility each side has over the other’s activities is vital to building trust.
Nick Manning, managing director of business development, Ebiquity & Stephen Broderick chief executive, FirmDecisions,