Transparency series: How to improve supplier contracts

Arvind Hickman
By Arvind Hickman | 23 May 2017

This is a free excerpt from the AdNews Monthly print magazine cover feature. Over the course of May we will serialise the feature into bite-sized chunks. To read the full article now download a digital version of AdNews or subscribe to the premium print edition here.

Contract transparency

The AANA has made great strides in addressing transparency and last year, produced a contract template and guidance notes to provide tools for marketers to ask the right questions about media agency contracts. The aim is to point advertisers towards the areas they should consider and question to “reduce or eliminate non-transparent and non-disclosed practices” relating to media spend.

It covers aspects such as advertiser and agency responsibilities, rebates and incentives, reporting, scope of work, third-party costs, sub-contracting, tech stacks, fees and expenses and audit.

AANA CEO Sunita Gloster said the measurement and true value of digital investments and the whole area of programmatic buying are “highly significant areas” of concern for advertisers, and that the documents have been well-received and are being put in place by some.

“I think there is a broad understanding from marketers that we are all complicit in having created the murkiness around the media supply chain. Driving accountability and transparency is not optional, it’s all our responsibility. From a marketer’s view, this will be about getting into the detail on the key issues, improving their capability and understanding, reviewing their contracts and asking more questions,” she told AdNews. 

Industry sources told AdNews they have noticed a positive shift in the past six months in the questions marketers are asking about contracts.

“What has been a good outcome of the whole debate in recent weeks and months is a lot more help providing clients the tools to ask the questions and get a bit more comfortable with the topic,” one CMO said.

How to tighten supplier contracts

Writing transparency clauses into contracts is one of the best ways to improve transparency and trust, several marketers believe.

“The only way to get around it is simple English contracts that state very early what you get and what you can't keep,” one marketer said.

“I would always do no commission contracts. So, no rebates, no commissions, and attest that value derived from the work cannot be used by anybody other than me.”

Wright believes most of the contracts have transparency and auditing rights with the agency, but this doesn’t cover trading desks, which are separate entities within the holding groups which means there’s no visibility of what the trading desk would purchase inventory at and clients would “never know” the mark-up.

“I’ve only come across a couple of live contracts in Australia that provide auditing rights across the whole agency group.”
Within the AANA’s contract template, group auditing rights are included, but agency groups maintain such provisions are hard for them to comply with due to the way their businesses are structured.

Woolley believes while it is important marketers tighten their contracts to ensure there are transparency clauses, this alone will not solve the problem because “there will always be ways around it”.

He said that agency audits, another idea often presented to improve media agency compliance, could encourage people to do the right thing, but falls down for two reasons. Firstly, audits shed light on historical information after the event, and, secondly, they can only cover the agency that a company works with rather than other companies in the supply chain.

Hyland supports six-monthly reviews of agency client agreements to ensure areas found lacking can be addressed.
Another aspect that needs to be looked at is clients pressuring media agencies into 90-day, 120-day and even 150-day payment terms. Such draconian measures mean agencies carry the cost for an extended period, eating into their remuneration and piling on pressure.

Check out the entire Transparency Series here.

You can hear these subjects tackled at the AdNews Live! Tackling Transparency event on 27 June. Tickets are now on sale. Speakers include Tim Egan, regional product marketing manager at Facebook and Tony Bell, national digital sales director at The Guardian Australia. More to be announced this week.  Early Bird discounted tickets are available until 26 May. Buy tickets now.

This article is part of a series on Transparency which originally appeared in AdNews in print.

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