Opinion
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Transparency is only way to avoid
abuse of media rebates and incentives
By Bob Liodice
The issue of media rebates and
incentives is clearly now at the forefront. It’s about time.
Recently, we released a white
paper
titled,
“Media
Rebates/Incentives Require Full
Transparency,” in which we surveyed
nearly 200 client-side marketers
about this practice. We discovered
that nearly one-third of U.S. marketers are aware of rebates and incentives offered by media companies
that may not be reimbursed to the
advertiser. Most marketers also
believe that such rebates and incentives are the property of the advertiser, and they are concerned that by
accepting and not disclosing incentives and rebates, agencies may
become irresponsible in their mediapurchasing decisions.
Now more than ever, we are in a
world driven by transparency. It’s
imperative that we are clear in our
business dealings within the marketing industry.
There is nothing wrong with the
concept of a rebate or an incentive. In
many instances, they serve the best
interests of both purchaser and seller.
And this practice has long been
acknowledged as commonplace outside the United States. However, if
mishandled or hidden, rebates and
incentives can constitute one more
shady business practice in which at
least one stakeholding party is left out
in the cold.
AVOIDING CONFUSION
The first concern marketers have
is the potential for lack of transparen-
IT WOULD BE A
SHAME TO SEE AN
INFLUX OF
UNREPORTED
INCENTIVE ACTIVITY
TARNISH THE
BRILLIANT WORK
OF THE
AGENCY-CLIENT
PARTNERSHIPS IN
OUR INDUSTRY
ADVERTISING AGE
BY THE NUMBERS
85%
of those responding to an
ANA poll of marketers
thought that agencies should
remit all rebate and incentive
dollars to their clients
63%
believed that agencies that
accept rebate or incentive
dollars may not be objective
about their media-allocation
recommendations
30%
conduct periodic audits to
ensure that undisclosed
rebate or incentive activity is
not occurring with their
agency.
cy and confusion about ownership
and the allocation of media rebates
and incentives. Marketers, whose
funds are the ultimate source of revenue for agencies and media companies, have every right to establish
their ownership of rebate and incentive funds. As with any business transaction, the most-advisable answer to
concerns about transparency and
allocation is for all parties to come
together in contractual agreement.
Leadership in this area belongs
primarily to the marketer, whose
resources are being channeled
through agencies to media companies. It is essential that marketers and
agencies contractually agree before
the fact on how these valuable rebate
and incentive funds will be handled,
regardless of whether or not they are
anticipated.
About one-third of U.S. marketers,
the same amount that indicated an
awareness of media incentives and
rebates in the U.S., report that they
already have contract language in
place addressing incentives and
rebates. This is a start, but there is
still a long way to go.
The second concern marketers
have is that the carrot of media incentives and rebates might affect their
agencies’ media-purchasing decisions, resulting in a marketing mix
that is less than optimal for the marketer. Some have even suggested that
procurement has tightened agency
margins to the point that incentives
will become a defining purchase driver for them.
I don’t believe that shrinking margins have or will drive U.S. agencies to
under-the-table rebates and incentives, and I am confident that agencies know that the best bet for their
business’ success and growth is to
focus on campaign and marketingmix quality, above all else.
BEST INTERESTS
It would be a shame to see an
influx of unreported incentive activity tarnish the brilliant work and relationships of the agency-client partnerships in our industry or to see
marketing mixes become abused and
turned toward incentive dollars
rather than marketers’ and creatives’
best interests.
The goal here is not to dwell on
the question of whether media
rebates and incentives are legitimate
and legal or if marketers will only
accept them if all rebate and incentive
funds are summarily returned to
them. The goal—and the ANA’s aim—is
to maintain transparency, accountability and equity across the U.S. marketing industry.
Margins have been squeezed on
every side during the recession, resulting in streamlining and creativity that
are healthy for our industry. In no way
does this give license to the spread of
undisclosed business practices. Clearly
there is room for a candid discussion,
contractual agreement and fair distribution of media rebates and incentives
if they continue to play a role in the U.S.
marketing ecosystem.
Bob Liodice is
president-CEO of the
Association of
National Advertisers.
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OCTOBER 1, 2012 • 49