ANA Releases 'Transparency' Guidelines, Contract Template Too: Calls For 'Chief Media Officer' Role
- by Joe Mandese @mp_joemandese, July 18, 2016
Advertisers should require their agencies to disclose “all potential conflicts of interest” and comply with thorough audits covering the agency, its parent company, affiliates and subsidiaries to ensure full transparency. That’s the core recommendation made as part of a series of “Guidelines for Achieving Media Transparency,” released today by the Association of National Advertisers.
The full report, which can be downloaded here, also calls for the creation of a new chief media officer role inside big marketing organizations to oversee and ensure full transparency from its agencies and the media supply chain.
The recommendations, which are part of a new report -- “Media Transparency: Prescriptions, Principles and Processes for Marketers” -- conducted by Ebiquity’s FirmDecisions subsidiary for the ANA, includes a detailed contract “template” for agencies.
advertisement
advertisement
The report comes a month after the ANA released a controversial reported conducted by K2 Intelligence, which found non-transparent business practices, including cash rebates to media agencies, to be pervasive in a sample of sources representing the “U.S. media ad-buying ecosystem.”
In particular, the K2 report found evidence that agencies routinely act as the principle, purchasing media on their own behalf and reselling it to their clients after a “markup.”
“The purpose of these guidelines is to provide marketers with prescriptions for addressing transparency issues specific to the K2 Intelligence study,” ANA President-CEO Bob Liodice said in a statement issued with the new guidelines. “We outlined actions marketers should consider to diminish or eliminate non-transparent and non-disclosed agency activities and to ensure that their media management processes are optimized.”
The contract template being issued along with the guidelines was first created by the Incorporated Society of British Advertisers and was adapted for the U.S. marketplace by ANA general counsel ReedSmith LLP. It includes provisions such as a requirement that revenue earned by the media agency and agency-related parties should solely be the fees and commissions set out in the contract, unless otherwise expressly agreed upon by the advertiser. All financial and other benefits should be returned to the advertiser unless expressly agreed otherwise by the advertiser, the template stipulates.
Other key recommendations issued in the report include three “pillars” and seven “strategic recommendations.”
The pillars are:
Establish overarching agency management principles that can be easily understood and executed. These include requiring media agencies to ensure complete transparency in all transactions with parent companies, subsidiaries, affiliates, and third parties. Agencies should err on the side of communicating everything to marketers, the report said.
Establish primacy over the client/agency relationship, and regularly re-evaluate and upgrade internal processes and practices. The report said it is essential that marketers have a thorough understanding of the existing client/agency relationship and know when the agency is acting as an agent on behalf of the client or as a principal representing itself.
Create a uniform code of conduct between the advertisers and agencies. The code of conduct between advertiser and its AOR would be mutually agreed to, signed by both parties, and serve as an addendum to the master services agreement.
The strategic recommendations are:
Where the agency is acting as a principal versus an agent, the advertiser should have a disciplined and reliable process for managing conflicts of interest.
Advertisers should ensure contracts with media agencies include robust language to deliver full transparency.
Advertisers should insist on thorough and far-reaching audit rights that include tracking contract compliance and measuring the media value delivered.
Marketers must implement disciplined internal processes to deliver contracts designed to ensure strict accountability, rigorous process governance, and senior management oversight.
"It's a top priority of the 4A's to review this report thoroughly as it could affect many of our member agencies," 4As President-CEO Nancy Hill said in a statement responding to the ANA report.
"We plan to share specific steps and insights in the near term. As we stated in an earlier letter, we will propose sitting down with the ANA to explore common ground and try to address important questions and concerns regarding media buying practices for both agencies and marketers."
In my view, the most important recommendation and one that will most likely be ignored is that advertisers create---and empower---a chief media officer. If this is acted on such a CMO would have appropriate quality staffing and be responsible, not only for policing brand media buys and seeing media reps, but critiquing brand media plans as well as investigating---with proper funding---- emerging alternative media, new ways to target consumers, new buying methods such as "addressable TV" or "programmatic" buying, etc. Moreover, the CMO would report to top management, not the chief marketing officer---aka the marketing director---so he/she would be free to voice contrary opinions to management about how the brands are spending their media dollars, how well they are defining their consumer targets, etc. If seriously implemented, this would represent a sea change at most advertisers----but I'm not holding my breath waiting for it to happen.
Rather than a Chief Media Officer, why not put the CFO, Chief Financial Officer in charge? The CFO reports to the CEO and these are the executives that are most accountable for the bottom line. They are on the front line of the Earnings Call having to face Shareholders and explain the rationale for these big marketing budgets. I recently read that the CFO of P&G recently cut over 370 billion from the advertising budget, so why not put him or her directly in charge of how it’s spent?
Of course this would require the ANA, Sellers of Advertisers, and the Marketers that purchase the advertising to adopt a new policy toward advertising. One in which all Sellers of Advertising agree to provide all Advertisers a guaranteed sales increase or ( GSI™) for every product advertised on their media networks. Such a policy would simply provide that: 1. The Seller of Advertising guarantee a specific number of increased sales to the Advertiser. 2. The Advertiser pays no money up front. 3. The Seller of Advertising runs the Ads. 4. When the Advertiser makes the agreed on sells the Advertiser pays.Such a policy and contract would be fair, effective, and transparent. And perhaps most pertinent to the goals of the ANA, all advertising fraud would immediately disappear.
Mark, the chief media officier should be more than a glorified accountant. It's not just about calculating the costs of attaining audiences, it's much broader than that. The CMO should be able to challange and/or guide the brands' often arbitrary and ill-informed media planning assumptions, including media mixes, over reliance on one medium, fear of using newly emerging platforms, etc. The chief financial officer at every company I've known is not qualified to do that---nor are the staffers under his/her command. Most important, the new chief media officer must not be under the thumb of the brand managers or their boss, the marketing director. Without freedom to speak candidly, all you will get is what you have now----which just aint cutting it.
Ed: While I certainly respect your career, expertise and accomplishments, we disagree on this chief media officer idea. The Chief Marketing Officer must be responsible for media; in many organizations the CMO's staff includes one or more media executives who drive strategy, execution, results and accountability. It's not necessary to create (yet) another C-level position. In fact, it also runs the risk of creating another silo, artificially separating message and media, just as ad agencies did by spinning off their media departments almost 20 years ago.
I will concede that CMOs and media execs may have lost the sense of caveat emptor they should have when it comes to highly-technical digital media. But it doesn't demand a new layer of corporate governance, nor does it excuse the media vendors and agencies who poisoned the media ecosystem with less-than-transparent, less-than-ethical business and billing practices.
Steve, if it was working with the advertisers' media guys/gals reporting to marketing, I'd agree with you. In fact, some exceptions notwithstanding, most marketing directors regard media as a by-the-numbers eyeball buying function and see it's main duty as executing exactly what the brands want---not challenging them or suggesting alternative approaches. This leaves the typical agency with two "clients". One, is the real client---the marketing director whose primary focus is on sales and ad campaign development----and the "other client", often regarded secretly as a pest---the advertiser's media person who gets involved in upfront TV buying, prods the agency about CPMs, sees many media reps and asks the agency media planners what they think of said pitches, etc. I have seen too many cases where everyone on the media side--- at the agency and the client---privately thinks that the brands are not using their media dollars wisely, in effect, dictating the media mix based on arbitrary, don't rock the boat or follow the leader thinking. However, everybody knows that the client's media director is not empowered to challenge this without risking his/her neck. Result: nothing changes and you get the same old, mostly client-mandated media plans year after year.
I'd like to see this change and, as I mentioned, there are some exceptions, but without reordering the inbred system and pecking order, I believe that it's unrealistic to expect much more than policing media buys from the current client media department at most advertisers. I believe that this is what the ANA report team had in mind with their recommendation. I also believe that it won't be acted upon. Sadly.
Ed, if what you describe is accurate then what would be the difference between this new Chief Media Officer and the current Chief Marketing Officer role? From what I have observed, most Chief Marketing Officers have little interest in eyeballs to sales ratios in their Ad campaign development. If that were the case you would see the Chief Marketing Officers embrace or at least explore the possibility of guaranteed sales increases when buying Ad time. And while it's true the CFO interest is on "calculating the costs " he/she would also look for a return on investment that effects the bottom line, and hold everyone involved accountable. And that's what we are lacking as an industry. No one should spend a billion dollars on advertising and not be able to tell how many sales where made from that expenditure.
Mark, obviously the roles would vary from one advertiser to the next and across product/service categories. Also, I'm talking only about branding, not direct response advertisers---mainly major "linear TV" users.
In most cases, the chief marketing officer----or marketing director----is responsible for the branding and, sometimes the sales functions. Needless to say, this includes new brand development, brand management and profitability as well as many related activities. Currently the advertiser's media director is in the same organizational grouping, but---to be frank---in most cases, in a subordinate role. As such, the current media director, who is usually very understaffed, must rely on the agency for much data and servicing guidance, but is not empowered----except in unusual cases---to challenge a "bad" media plan that is mandated or "endorsed" by brand management. Working independently from the marketing director, this would not be the case and top management would, in theory, get new thinking about how the brands' media dollars were being spent.Of couse this might set up an adversarial situation and it would be wise for the new chief media officer to not only educate the brand people about media---a much needed wakeup call ---but to conduct him/herself in a constructive manner. Still, there would be problems----no point denying it.
As regards a CFO's ability to define, let alone determine the ROI for branding campaigns, I doubt that this exists in a realistic sense at most advertisers. Also, very few but the most desperate media sellers, will guarantee sales per ad dollar spent, so that kind of data is simply not available. Consequently, the CFO will inevitably revert to the basic accountant's view of things---"you spent so much, what did you get for it?'without being able to suggest newer, better approaches. The knowledge simply isn't there.
Thanks for the clarification, Ed. You're pointing out something I've observed from time to time: Marketing and (let's call it) Marketing Services or MarCom are not in alignment. In some of those cases Marketing defers to the media experts, and in some cases they don't. In our organization we're integrated; there is no wall between the two, and we make sure marketing, media and message work together.
Ed, how do you justify giving branding campaigns for linear television a free pass from being accountable for the money it cost to run them? And the "you spent so much, what did you get for it?" view should be the norm since we are talking about business. Not only should that be the expected view of the CFO, but also the CEO, CMO, and every officer and owner of the company. You can best believe that is the view of every shareholder whose money is being used to fund these branding campaigns. As far as media sellers that guarantee sales increases being “desperate" well, it would seem more accurate to view them as pioneers and smart business leaders. Especially when they have the knowledge and technology to deliver on that promise.
Mark, nobody gets a free pass in the branding game, however the rules are different from those that apply in direct marketing, where you spend a certain amount and can trace the response almost directly to each wave of ad impressions---and, sometimes to each impression. In contrast, your typical branding advertiser does not sell direct to the consumer---the stores, franchisees, dealers, etc. do that. So the branding campaign is intended to gain awareness of the brand and its basic selling proposition across a fairly wide spectrum of current and possible/likely buyers. If it works, this will stimulate sales.
Your question implies that you think that branding campaigns are seat-of-the-pants efforts without accountability. That's not true---except for a few companies run by idiots. In most cases the proposed positioning strategy and the commercial executions go through a pretty severe vetting and testing process before the public is exposed to them. Once the campaign runs its ability to get the attention of the targeted consumer groups is monitored via ad recall and motivating power studies as well as others which track the campaign's total awareness buildup. Also, even though each item that is sold isn't evaluated on an "attribution" basis, overall sales results are closely monitored. If the campaign isn't getting the awareness levels that were planned, or it is failing to convince enough consumers or sales are lagging, then it is likely to be pulled and a new campaign developed.
Finally regarding a media seller guaranteeing sales, that sounds fine, in theory, but just about never happens in branding campaigns because it places the seller in an impossible position. How do you measure it? If I buy an ad schedule on TV Channel X, I have no way of determining whether its audience bought more of my product---or less---and why this is so. Sure, you might try to single out a sample of regular Channel X viewers and compare sales among this group with a random sample of the total target group---but how do you account for media overlap? How many Channel X viewers also saw the commercials on Channel A or Channel B? Furthermore, if a media seller assumes the responsibility for an advertiser's sales performance, is this a sensible thing to do without controlling what the advertiser says in his commercials or making sure that the product does what it says it does? Suppose the ad campaing is off base or the product isn't really that good and sales stink. Is that the media sellers fault?
The basic point, and I will say it again, is that branding campaigns march to a different drummer than direct response campaigns. There's nothing wrong with that and often an advertiser will use both methods in a complementary manner. But they are different.
Ed, branding advertisers do sell directly to the stores, franchisees, and dealers so they absolutely can be held accountable for direct sales and the revenue generated from those transactions. This does not absolve the retailers whom also must participate to increase sales to consumers. If you look at the problem from the current paradigm of branding campaigns it does seem unsolvable. However it is very possible with the absolute certainty of mathematics. Specifically, guaranteed sales increases are made possible by powerful polymathic algorithms. The variable of other Ad campaigns are factored out by counting sales increases as only being net new revenue. If you run the algorithm correctly, preferably with the aid of computers, you will know in advance exactly how many sales will be made. Therefore the perceived risk should be carried by the owner and operator of the algorithms. If this is the media seller then the Ads run without any upfront payment from the advertiser for commercial airtime. After the sales are made the advertiser pays. A completely transparent, fair and fraud free way of selling advertising. This new era of technology does not change the importance or value of those that work in marketing and branding functions. However it does hold everyone accountable to the bottom line.
Mark, if you really think that your vision of accountability will work I recommend that you approach some of the leading TV branding advertisers---like P&G for example--- and suggest that they try it. Of course you will have to convince almost of the time and space sellers to go along with this----not an easy task, I'm afraid---and you will have to educate the agencies on how to execute it as well. I have a hunch that once you try to apply the guaranteed sales theory in the way you describe that you may encounter some difficulties but I'm not against progress. Why not give it a shot and see what happens. And best of luck. I'll be rooting for you.