I hate to say it out loud , but there are many scenarios in my industry where agencies are taking their clients for a ride and they don’t have a clue. The tactics they use, the management of a client’s account and the back door deals they make are engaged to benefit the agency and not their clients. For the clients, here are a few things they should look out for to try and ensure they don’t get taken for a ride.
1. Purchasing Advertising Based on Kickbacks and Perks
Media outlets are always competing for business. Depending on the size of the agency, one sure fire way they do this is by offering various types of “gifts” or “perks” to the agency that is placing the media buys.
Deals made with hidden incentives distort their marketers’ plans or abuse their budgets more than you would think. In some instances, the gifts are reasonably small and harmless. They might be rewarded with tickets to a high-profile sporting event or show. Depending on the size of the buy it can easily escalate to serious electronics, even all-expense paid trips.
And, when the agency has made the “big time” many of the larger agencies demand incentives, not simply expect them. When the agencies are large enough a reciprocating fee is paid by the outlet to the agency sometimes amounting to millions each year. Quite often it happens when bulk inventory agreements are exchanged between the vendors and the agency.
And, finally there is barter. A large company will offer cash to the media vendor in exchange for a significantly discounted placement rate, then sell the client retail pricing, pocketing upwards of 25 – 40% more than the client is aware of.
2. Using third party vendors to place the business (subbing out the work)
When advertisers hire an agency to help them grow their business, they typically don’t know that their advertising may being purchased by another agency, they know nothing about. A provider that they didn’t vet nor choose.
“Middle-man” agencies are prevalent in media buying. While some full- service agencies actually do all their work, in these times, that is rare case. While claiming they provide all services for their clients, they outsource the buying duties to other vendors that actually do the work.
This model often leaves the “middle-man” buying agency very thin commissions and margins, so they need to rush through buys much like an assembly line. The client neither receives the attention they need, uncovers their best opportunities or gets the best price for the product. Rather it’s churn and burn, get the buys in and out as quickly as possible. In addition, often the buying firms go through corporate media offices adding insult to injury or worse yet use rep firms. Clients have no direct contact with the staff running, optimizing, and making key account decisions for them.
And if all of this isn’t deceptive and bad enough, it almost always costs clients considerably more in fees because now they have to pay two or sometimes three parties to do the work, when expected that their agency was working for their monthly retainer fees. Instead they add the fees of the buying agency and rep firm and present the costs as the “net” media prices.
3. Making Money from Only Selling Specific Forms of Media
While relationships can be beneficial, some agencies “develop relationships” with media outlets, more based on incentives than efficiencies. They guarantee the vendor all their business in a particular category to get a “better deal” for their agency. Quite often this parlays into a buy not necessarily in the client’s best interest.
With so many media outlets available in all forms of media, if a company sees that the recommendations from their agency don’t vary from campaign to campaign, or make clear and concise sense, it means the agency isn’t doing their homework on all the opportunities or are pigeon holing a client into a particular medium for personal agency gains.
4. Added Value Isn’t Monitored or Accounted For
While negotiating terms with an agency, vendors often will offer “added value” as a way to seal the deal. In other situations, the agency will request added value in order to show their clients that they are getting them more for their money or to show them a better CPM.
The problem with this is the agency doesn’t get paid for its delivery, so as long as what is billable runs, everything is good in their world. And the media outlets, while they used it to sweeten the deal, typically don’t fulfill that portion of the buy. Since media outlets never stop selling inventory, they often oversell their inventory. They know they can bump the “added value” or “free” placements for paid placements. The agency get’s its money, the vendor gets its money, the only person out is the client. Added value is only valuable when it’s guaranteed and a portion of the economics of the entire buy. Any less and it can be completely worthless.
5. Bottom Line Invoices
As media runs or airs, changes to the original media plan can occur. Ads may be preempted by news events, political ads or bumped for a higher paying client wanting the same placement. In some cases, it’s an advertiser making a last-minute budget change or cut, and the agency may have to cancel some of the media campaign. Since the agency plays the middleman, billing the advertiser for the cost due at that time is bottom lined. Many agencies like to “Bottom Line” invoices to their clients.
Agencies provide clients with a heap of invoices representing activity that has already occurred. This invoicing process enables agencies to hide many underlying charges to their clients without a description or details of those charges.
Clients have the right to see every transaction supporting the monetary value behind the billing lines, only then can they truly evaluate the facts behind each expense. The details of each invoice truly belong to the end bill payer and should be made available to them as a matter of routine.
While not all agencies practice these underhanded tactics, clients need to be informed and educated about them, so they are able to question their agency ahead of time, if need be. Trust is a critical matter when buying media. Navigating the waters of media buying requires a lot of faith in your partner – especially when you consider the large amounts of money involved. Avoiding agencies that aren’t open and honest is crucial. An agency partnership with complete transparency is the only way to go. This will help to ensure clients don’t lose money or have decisions made for them that are not in their best interest.