The following is republished with the permission of the Association of National Advertisers. Find this and similar articles on ANA Newsstand.
By John Wolfe
When media agency executive Jon Mandel alleged from the stage at an ANA national conference in March 2015 that media rebates were widespread in the U.S., he started a fire that is still burning today — and causing a fair share of agita within the marketing field.
Mandel’s comments illuminated a problem that’s plagued agency/client relationships for decades: trust — or a lack thereof.
Mandel’s explosive claims led the ANA to commission what’s become a landmark study titled “An Independent Study of Media Transparency in the U.S. Advertising Industry.” The 2016 study was conducted by K2 Intelligence; it took the pulse of 150 business professionals, including marketers, media suppliers, ad tech vendors, current and former advertising and media agency professionals, trade association executives, industry consultants, attorneys, barter company employees, and post-production professionals. The study concluded that rebates were “pervasive” in the U.S. media supply ecosystem.
The study’s findings reverberated throughout the U.S. advertising, media, and marketing industries and served to exacerbate already strained client-agency relationships. In the ensuing four years, both marketers and agencies have taken a wide range of steps specifically designed to regain trust on both sides, and many executives say there have been significant improvements. However, others claim that despite best efforts, significant problems remain.
A separate ANA survey of 188 respondents conducted last fall showed that media rebates were the top issue contributing to the breakdown of trust in the advertising ecosystem. ANA partnered with its outside counsel, Reed Smith, on the study, which showed that 32 percent of respondents cited media rebates as “a big problem.”
Other issues cited in the study as contributing to the breakdown of trust included invalid traffic and digital ad fraud, data confidentiality, and agencies reselling media to clients with an undisclosed markup — all labeled “a big problem” by 30 percent of the respondents. The 2016 K2 report also listed the aforementioned concerns as existing throughout the industry.
“Having worked on both sides of this coin, I find that agencies and clients don’t understand one another as well as they should and could.”
— Dana Anderson, chief transformation officer at MediaLink
“The 2016 ANA/K2 Intelligence report validated longstanding concerns about nontransparent rebate behavior, but it also illuminated marketers’ lack of discipline to keep their media contracts fresh and updated,” ANA CEO Bob Liodice said in a press release announcing the study. “While significant progress has been made since then, this new survey indicates the persistence of those issues.”
As part of a possible solution, in March 2019 the ANA created the Trust Consortium, an alliance among ANA members and their partners designed to be a voice for brands on transparency, measurement, auditing, digital fraud, and brand safety.
Among other efforts, the Consortium creates white papers on best practices and key issues, FAQs, templates, and industry standards for marketers, agencies, and suppliers. Its focus covers both demand-side and supply-side platforms, including media buying agencies, trading desks, and publishers.
“The Trust Consortium is designed to help marketers advance the interests of their brands and provide them with the tools they need to keep supply chain participants honest and transparent,” Liodice added, in the statement. “Trust is the foundation of growth and will be restored through full transparency and integrity — not through realignment or prenegotiated positions.”
Transparency, Laced with Generosity
Yet despite the Consortium’s efforts, problems persist that continue to erode trust between clients and their agencies, according to industry experts.
Douglas Wood, a partner with Reed Smith and a founding member of the Trust Consortium, says the problems exist on both sides of the table. “Marketers are not taking enough control of the agency relationship, in particular with regard to transparency in digital,” he says. “Undisclosed interim markups by affiliates is a major problem that hides profits earned by the holding companies that should not be charged to the marketer. Agencies continue to offer — and clients continue to buy — nontransparent service offerings, which feed into the lack of trust.”
Wood stresses that the friction sparked by undisclosed markups is particularly acute. “Marketers blindingly buy into opt-in deals that are devoid of transparency,” he says. “It is impossible to know what the costs truly were without knowing where markups have been taken or incentives from media have been misallocated to other agency affiliates to avoid detection in audits. Marketers should question their agencies and not just assume that the agency has the advertisers’ best interest at heart. Advertisers can trust, but that trust must be verified.”
Dana Anderson, chief transformation officer at MediaLink and a former top marketing executive at Mondelēz International and agency DDB, agrees that the trust issue remains a serious industry problem despite myriad efforts to improve it.
“Being transparent and clear … builds trust, accountability, and a better partnership. It avoids the ‘out of nowhere’ mentality.”
— Rob Master, VP of media and digital engagement at Unilever North America
“Daily, even without knowing it, we do and say things that reduce trust with our partners,” Anderson says. “Having worked on both sides of this coin, I find that agencies and clients don’t understand one another as well as they should and could. I also sense that our changing mores and deflated margins both conspire to keep trust locked up in a trunk.”
Anderson says part of the problem lies with both agencies and their clients “over-promising, taking credit that is not theirs, exaggerating their role in a success, demanding work be done quickly without a clear brief, and forgetting to say ‘thank you’ and ‘I’m sorry’ when necessary.” She adds that the best way to deal with the issue is through “transparency and honesty laced with generosity.”
Wood believes the best way to achieve longstanding trust is through strict, detailed agency/client contracts that address every area that could lead to abuse.
“Some of the issues of trust can be improved by having a robust agency contract and then having a robust contract-compliance process in place,” Wood says. “This would include regular audits, explicit protocols, procedures, and guidelines for ensuring compliance with the contract.”
He adds that such contracts should also include strict policies and procedures for approving spending, and special sign-off protocol for any nontransparent spending. Guidelines for production bidding that discourage bid rigging, along with requirements for disclosures of material connections with third parties, could also be included. “All too often, the advertiser is unwilling to ask tough questions out of fear that their relationship will be damaged,” Wood says. “Marketers assume agencies are partners looking after the best interests of the marketer. All too often, that is not the case.”
Marla Kaplowitz, president and CEO of the 4A’s, counters that many marketers make unfair and unrealistic demands on their agencies, which leads to a lack of trust. “When marketers make unfair demands on agencies, like excessive payment terms of 120-plus days, and ownership of ideas during the pitch process with no remuneration, it’s no wonder that trust erodes,” she says. “Challenges related to trust are often symptomatic of larger issues between the partners, like mismatched communications and expectations, as well as how the relationship was defined at the start.”
She adds that implying an “inherent suspicion” exists between agencies and clients assumes the relationship must be negative. “When trust is solely referenced in a negative sense, all parties start from a place of distrust, and it’s a self-fulfilling prophecy,” Kaplowitz says. “However, if partners start by agreeing on their goals and expectations, they are much better equipped to solve business challenges and drive growth through creativity. The agency and marketer can come together by continually assessing their overall relationship and aligning on communication, compensation, and mutual expectations.”
One client who would appear to have taken Kaplowitz’s advice is CPG giant Unilever, where Rob Master, VP of media and digital engagement in North America, says the company has taken several steps to improve the level of trust with its agency partners.
“We don’t let issues fester on either side,” Master says. “One of the key things that is positive in our agency relationships is communications, and that includes both formal and informal feedback. We’re pretty disciplined about this. We’ve been clear with our agency partners on pitches and the agency review process. Being transparent and clear about those builds trust, accountability, and a better partnership. It avoids the ‘out of nowhere’ mentality.”
Master says Unilever has made a concerted effort toward maintaining trust not only in the area of communications, but also in the level of the role senior executives play in partner relationships and in what he calls “partnership investment.”
“Our senior staff is intimately involved in the (agency) process,” Master says. “(Unilever CEO) Alan Jope is constantly talking about the importance of our agency partnerships and views them as extension of our team. Our agencies are integrated into our teams and work closely with senior-level management. Both sides have a stake in it and are fully engaged.”
Tony Rogers, chief member officer at Sam’s Club, agrees with Kaplowitz that a clearly defined and aligned set of goals and expectations from both sides is essential to a trusting relationship.
“The key is alignment of objectives,” Rogers says. “If the agency is truly incentivized on growing the brand and the business, and not just selling more advertising work, that sets the foundation for a trust-based relationship. Obviously, the people and the personalities matter too. People with a high degree of integrity, a strong work ethic, and a low ego are going to be more likely to earn my trust.”
Rogers says he has been fortunate because most of his agency partnerships have been positive, productive, and possessing of a deep level of trust. To paint a picture, he relays a favorite anecdote.
“Years ago I worked with a guy named Brad Armstrong from The Martin Agency,” he says. “It’s the best agency relationship I’ve ever had. We became so close on a day-to-day basis, and our goals were so aligned, that an outsider observing the relationship would probably have struggled to figure out which one of us worked for the agency and which one worked for the client. And those years we were together, it was some of the best work I’ve ever been a part of. Trust is not a problem for me, currently. But maybe I’m just lucky.”