Are Media Buyers Getting Cash Back?

From Jack Neff, Advertising Age

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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