Enth Degree

Are Your Agencies Partners or Suppliers?

31.07.2014

News & Insights

When asked what differentiates Enth Degree recently, the response required no delay…”unashamedly client focussed”.

Someone needs to be, because it seems this simple business ethic is lost on many of marketers’ communication “suppliers”.

While in industry circles it is more acceptable to refer to agencies – be they creative, media or other – as a client’s partner, this is a relationship based on trust and earned over time.

In a business partnership, the partners have a significant responsibility to each other. Each partner must act in good faith toward the other partners and must not take any advantage over the other partners by misrepresentation or concealment. Each partner owes a duty of loyalty to the partnership, and this duty bars the making of any secret profit at the expense of the firm.

There is an undercurrent of growing discontent among the marketing community who suspect that some media agencies may be breaching that essential tenet of a successful partnership…

And for good reason. The delineation between buyer and seller is becoming very blurred.

In simpler times, Media Agencies developed strategy, planned and bought media. While the Media Agencies’ main focus continues as strategy, planning and buying, they now cross-sell amongst their “family” of businesses. Marketers are becoming confused as to whether recommendations to invest in ancillary (insert Agency Group name here) services are driven by the Agency’s desire to assist the marketer achieve campaign success, or enhance the Agency’s yield from the client’s budget.

Today’s media agencies are walking a fine line between seller and buyer. The biggest offender in all of this is the Agency’s DSP. Here is an area where the Agency is both buyer and seller!

Marketers have no transparency of the cost paid by the Agency to the publisher, and because the DSP is set up as a separate company, they are arm’s length from a financial audit. I am advised that at least one major buying group is yielding over 50% of the budgets allocated to their DSP. (On top of that, the Agency’s clients pay a service, usually far greater than the non-digital fee).

Is this not a carefully disguised form of “secret profit at the expense of the firm”?

In days gone by, the term for what is happening with DSPs was called “space farming”. Buying at one rate and then charging out at another. Given that Agencies are paid a service fee for their services, levying additional costs on media is dishonourable business practice, and certainly not in the spirit of a good partnership.

We recognise that Agencies need to make a fair profit to reward staff and shareholders alike, however while this practice continues Agencies should be referred to as suppliers, and we will continue to be unashamedly client focussed when reviewing media agencies’ terms and practices to assist them achieve their communication objectives at an honest market price.

graham@enthdegree.com.au

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