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Rebates central to agency-client trust

News, 07 April 2016

LONDON/NEW YORK: Both advertisers and agencies agree on the importance of trust in their relationship but a new survey indicates media agencies have some work to do in convincing clients that they're being transparent about rebates.

The 2016 Transparency Survey, undertaken by strategic media consulting company ID Comms, was based on responses from 140 senior executives at agencies and advertisers, including marketers from brands spending an estimated $20bn each year and responses from all the major media agency networks.

This found that more than 70% of advertisers and agencies globally believed that the way an agency manages rebates was the most important factor in the level of trust that advertisers have in media agencies.

In the US, the general issue of "how the agency makes money" was rated more important by advertisers, at 81%. Agency respondents tied "how the agency trades with media vendors" and "how the agency manages rebates/AVBs" as the most influential factors in determining advertiser trust at 67%.

US clients were slightly more positive about the current levels of trust with 61% describing them as "average", 26% as "low" and 13% as "high". By contrast, some European marketers were very negative with 14% saying trust levels were "very low" and 22% describing them as "low".

Agencies were more optimistic about the future prospects for the relationship while also recognising the challenges facing the business with 39% expecting things to get worse compared to 38% who thought it would get better. Twenty-three per cent said it would remain the same.

Among clients, the outlook was more sceptical with just 7% expecting trust to increase "a lot" compared to 15% for agencies. US advertisers were even more hesitant than their European counterparts, with 17% expecting trust in media agencies to reduce "a lot" compared to 11% for European-based executives.

Tom Denford, Chief Strategy Officer at ID Comms, suggested that transparency could deliver benefits for both advertisers and their agencies, but added that the former were concerned about the business models adopted by the big agency groups.

Fair payment models, best-practice contractual language and a clear view of how budgets are traded by the agency were the route to building a trusting partnership for the benefit of both parties, he said.

Data sourced from ID Comms; additional content by Warc staff