The Transparency Controversy: Rebates and Language

AdAge headlined their first report “Advertisers and agencies far apart …” and quoted Ana Jernestaal, Assistant VP Finance for L'Oreal USA as follows: “We know [rebates] exist, but we're sitting across the table from advertising agencies that are flatly denying it.”

There is much to discuss even in those 18 words. First, the quote comes from a financial person, not a marketing person. This in itself is interesting, as an illustration that the client conversation has moved from marketing into financial management. Second, the use of the word “rebate”; third the use of the word “advertising.”

As the debate intensifies and moves away from its natural home in marketing services, so less-informed departments begin to get involved. As someone once said, a little knowledge is a dangerous thing, especially if you’re an agency.

Some clarity is needed, beginning by accepting that the fundamental issue is less about whether rebates exist (of course they do), and more about what happens to them. In short, the discussion should really be about transparency, as opposed to an arcane argument about how the media marketplace works.

Further, the principles of fairness and transparency should work both ways. Certainly the agencies are guilty of not being clear and retaining sums from vendors that should be returned to those whose budgets generate them. But it’s also the case that advertisers have imposed conditions (like late payment terms) that may conceivably be slightly-less-than-totally-unacceptable in some circumstances but are not in any way reasonable given the commitments that need to be made to secure premium media inventory.

The ANA also heard from the main man, Irwin Gotlieb, Chairman of GroupM. Irwin has been around even longer than me, which is saying something. He’s been ahead of almost every trend; in short he’s had a remarkable career. Significantly, Irwin cut his teeth on Procter and Gamble. Anyone lucky enough to have done that has “doing the best for the client” as part of his DNA.

Of course we all know we all live in very different times -- not least the short-term market-driven demands of the holding companies on operating units including the media agencies. But certain principles still pertain.

Key amongst those is doing the right thing by the client. As earlier Cog Blogs have said, over and over again, an important element in doing the right thing is the sanctity of the plan. Plans are written to drive the client’s business. There is no better example of how agencies put their own interests first than the practice of putting the buy ahead of the plan.

Or, as Irwin put it: "I think at times we've stepped on each other a little bit. We've extracted results for ourselves on the back of someone else's activity ... And I think we do need to get better about that … When we talk to our staff, we remind them constantly that they're acting in the best interests of their clients.”

In a sense the furor over what does or doesn’t happen in the US is less important than the agencies putting their global houses in order. GroupM in the US, for example, must squirm at the activities of a GroupM agency in Australia, and to be fair they have acted on that situation, but misdemeanors keep popping up all over the place and in all sorts of agencies.

Given the scale and sophistication of global advertisers, and the importance they put on professional behaviors and standards, it is urgent that the holding companies start imposing similarly high standards on their buying operations.

They might start by stressing that the buyer’s job is to buy the plan. It’s not the planner’s role to justify a buy made to benefit the agency ahead of the client.

The opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of Media Village management or associated bloggers. Image at top courtesy of freedigitalphotos.net.