Recently, there’s been a lot of media buzz overseas about how Levi Strauss and Co. sought vendor invoices from media agencies competing for its $50 million (Rs253 crore) media planning and buying business for Levi’s and Dockers. Many media vendor invoices typically include details such as the date, time and programme during which a spot ran, including the client’s name and the unit price. The concern was that even if the client’s name was not given, these invoices could possibly be used to ascertain what other advertisers were paying and thus breach confidentiality contracts.
Irrespective of the veracity of these reports, benchmarking of media rates is a trend that is bound to catch on, especially in these days of tight budgets. More advertisers want to know if the ad rates they are getting on a particular channel or programme are as good as what their competitors are getting. Or if their new agency is a hard-nosed negotiator.
Media auditors such as Meenakshi Madhvani, founder of Spatial Access Media Solutions Pvt. Ltd, agree that media agencies should not share information about client-specific ad rates with other clients. She makes an interesting point: Ownership of this knowledge rests with the advertisers since they are the ones who ultimately foot the media bill. Only a client can share such information or can authorize his media agency to do so. She says it is common for advertisers to have “off the record” conversations with each other and share rate information, and indeed, deal details. This networking on rates is a good thing because that is the only way that an advertiser can get a sense of how the rates it is paying compare with those paid by others. Typically, when a client migrates from one agency to another, it usually does so by using the old media rates as benchmarks and negotiating lower rates.
It is, of course, pertinent to understand that media prices do vary by client, agency, period, category, and several other variables. So, it is difficult to establish the “best deal” for a particular requirement by using information drawn from another context, explains Chandradeep Mitra, president of Mudra Max, the Mumbai-based media specialist arm of Mudra Group. He is clear, though, that client-specific rates are sacrosanct. Most professional agencies are unwilling to share hypothetical rates for existing or potential clients, and definitely won’t share the rates of existing clients, he says. “Almost all client-agency contracts do have a clause barring the sharing of client-specific negotiated media prices.”
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Invoice sharing is actually a manifestation of deeper, age-old issues between clients and their agencies. Listen to Madhvani: “The fact that Levi’s asked for invoices means just one thing—not only do they want access to rate information, but they want proof from the agency that they are real and not notional rates.” This, she adds, confirms the concern many advertisers have voiced—that agencies go and under-quote on rates just to muddy the waters for competition. In India, it is a common practice for some big media agencies to provide clients with internal benchmarks, which some auditors say is tantamount to sharing rates. The agency average rate is arrived at by aggregating all the rates paid for a particular channel. While ad rates do vary across each client depending on the quantum of spending and other factors, these agencies want to make each client think it’s got the best deal—by buying at a rate lower than the agency average. But no one shares the rates that are actually paid for another advertiser. If everyone is going to be below the benchmark then it is mathematically impossible. In effect, it is all cooked up, says Madhvani.
Media specialists obviously do not agree with this. One leading media buyer says that some auditors themselves are walking the fine line. That, at times, the rates paid by their audited clients (information they would be privy to) would be used to help them benchmark rates for other clients even if names were not shared. In his book, that too is equivalent to sharing price-sensitive data in some manner.
This is a debate which could have no end. As economies and ad markets melt further in these days of terror and volatility, Mitra’s advice could help.
Mitra’s recommendation: Rather than ask for “lowest rates”, clients should ask for most cost-effective solutions for their media challenges. The “best deal” from a media agency is often the result of a combination of factors, including superior optimized media planning and various possible value additions and innovations, not just the “lowest cost” of buying media time/space.
Marion Arathoon is Mint’s advertising editor. Your comments are welcome at firstname.lastname@example.org