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May 20, 2015
The Rebate Debate: Really a Big Deal?
 
How could we have a conversation about the Advertiser/Agency relationship without mentioning transparency?

Alas, we cannot.

Yes, we all know that the client/agency relationship is flawed. Woefully flawed. There is a serious need to patch up the relationship in order for both sectors of AdLand to progress and succeed. We all need to play nice.

Now, with the scrutiny on rebates being received by agencies, it seems that rebuilding the relationship is getting more complicated.

For those marketers and advertisers unaware, this "spark" on agency rebates came from a conversation involving a high-up ad exec exclaiming that rebates (returns to agencies from media buyers in forms of inventory, cash or other) were widespread in the United States. And, the exec mentioned, much of the rebates should be going to the client.

Naturally, the party not on the take — the client — was upset. That distrust showed in a recent survey done at an ANA conference for procurement, financing, and sourcing professionals by FirmDecisions and Ebiquity. The survey, a pulse survey done during the conference, suggested that rebates were not only top of mind for these professionals, but 85% of the 100 respondents felt some pressure to decrease the amount they pay agencies annually.

Is this something mind-blowing? No, it's not. But as a pulse survey, a way to see what people are thinking about during a particular time, it is significant. We even spoke to Vivek Radia, managing director of North America for FirmDecisions, and though he played by the script, he saw the survey as a quick way to see how these people are thinking.

Of course, the WSJ and AdAge covered this before we got the chance to talk with him. But we're looking at this in a bigger frame of view.

This is only a symptom of a larger problem. Brand advertisers want more transparency because they want to know where all the money is going. If any money is coming back, they demand a conversation about how the money is divided up. That demand is not a bad thing. Agencies, on the other hand, seem to believe that since they are the ones developing the relationships with the media and media buyers, if anything extra should come their way, the agencies might be able to leverage the relationship for other clients or for themselves. Again, in theory, not a bad thing.

In reality, though, both parties want an extra piece but refuse to talk to each other about it.

Is there a solution? Of course. Like every relationship that doesn't see eye to eye, there needs to be a conversation. Can brands and agencies get along? It depends. The bridge both parties have crossed has now been burned down, so they need to either figure out a new plan or decide to end the age of the agency.

In closing, are rebates a big deal? To the folks counting where the money is going, absolutely. To everyone else, no, rebates are not a big deal.

What can advertisers and agencies do to make sure this doesn't happen again? They can talk.

What a concept! Honesty reigns supreme. When parties talk, they learn much more about each other, rather than relying on the actual relationship. Beware, clients — once good work is done, it should be rewarded. Play nice.

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Dwayne W. Waite Jr. is partner and principal at JDW: The Charlotte Agency, a marketing and advertising shop in Charlotte, NC. He enjoys consumer behavior, economics, and football.
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