Rebates, or, as they are sometimes more colorfully termed,
"agency volume bonification" (based on the word bonus), are loosely
defined as an agency's receipt of a volume discount or compensation from media
buys that is not necessarily passed on to the client. But even some critics of
rebates say they are a natural outgrowth of marketers' efforts to squeeze
agency costs.
They say that marketers' efforts to pare costs, eliminate
commissions that reward the most expensive media plans and create agency
incentives for media performance could ironically be boxing agencies into the
kind of cost-plus deals and tightly constrained margins that lead to creative
deal structures.
That's bunk, declares Judy Beaudry, a former Procter &
Gamble Co. media executive who is now VP-media at Kao USA. "I understand
everybody wanting to ensure maximum revenue," Ms. Beaudry said.
"Times are tough. But you've got to respect what the business relationship
is at its core. And agencies, especially some of the big holding companies,
have seen their revenues increase a whole lot faster than their clients.
"It's just wrong. I don't mean the rate of increase; I
mean taking these kinds of things on the side. It's not like their houses are
burning down and they've got to find a way to keep the place open," she
added.
"I have never understood agencies getting a benefit off
of clients' dollars," she said. "It just rubs me the wrong way. It's
a fiduciary responsibility. They're supposed to be helping me spend my money
best. And that's best for me, not best for them."
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