Advertisers and their agencies are heading in opposite directions when it comes to working out how terms of business can be constructed to ensure they are mutually beneficial, according to a new report from media change consultants ID Comms.
The findings of the 2017 Global Media Terms Survey reveal that agencies are still regarded with suspicion by advertisers, a number of whom think non-transparent incomes make it harder to use tools such as fees and terms of trade to incentivise agencies to behave.
The report, which is based on responses from senior executives at both advertisers and agencies, shows that parties on both sides of the divide are likely to regard current terms of trade as being less than mutually beneficial.
This is despite the fact that 80 per cent of respondents agreed or strongly agreed with the statement that: “media agencies incentivised by fair terms of business with their client will be more transparent and more aligned to their client’s business outcomes.”
Advertisers in both procurement and marketing/media roles believe the most influential factors in agency alignment and transparency are contract terms (scoring 4.5 and 4.6 respectively, where 1 is not influential and 5 is critical). Agency respondents believe the scope of work is the most important (4.4) factor in driving more aligned behaviour.
Respondents generally agreed that Payment Terms (the time between the agency issuing the invoice and the advertiser paying the bill) is the least influential factor.
The findings are based on answers from 102 respondents including senior marketers and procurement executives from companies with combined annual media budgets of more than $20bn. Agency respondents included all major media agency holding groups as well as some independent media agencies.
Respondents also differed about how mutually beneficial key elements of current practice were. Fees were rated overall as unfair while overall payment terms were rated as more fair than unfair by all participants.
The survey also highlighted continuing scepticism around transparency with some advertiser respondents believing that agency and particularly holding company behaviour is deeply embedded and won’t be changed by terms of business alone. “Fees are not as important, media agencies will continue to want to maximise revenues in a non-transparent way regardless”,” said one advertiser respondent.
ID Comms chief strategy officer Tom Denford (below) says: “A clear scope of work, fairness in fees and payment terms and a great contract that protects both sides are the must-have tools for aligning agencies with advertisers and creating a productive, trusting working relationship. However, it’s clear from these results that there remains a huge variety of opinions on what should drive this and the other factors that might be in play.”
ID Comms clients include Mars, L’Oreal, Barclays, Levi’s, Adidas, AB InBev, Puma, IKEA, Johnson & Johnson and Virgin Atlantic. The full report can be downloaded from the ID Comms website.