I’ll make a lot of enemies with this article, but you need to know the dirty little secrets of many ad agencies if you are ever going to have a meaningful, successful relationship with an outside advertising vendor.Notice I said ‘many’ ad agencies. There are some ad folks out there, like myself, who realize you don’t need the dirty little secrets to prosper in this business. Armed with the information I’ll share, you will be in a better position to understand, and negotiate a relationship with an agency that can help you reach your sales and profit goals with an acceptable return on investment.
I’ll tell you about the dirty little secrets in just a moment, but first let me tell you why I think an ad agency can be asset to any dealership spending at least $20,000 a month on advertising and promotion. The right agency will keep you consistent in the marketplace, shield you from unnecessary, unproductive, and ineffective expenses, provide you with an unbiased review of advertising and promotional offers, manage one of your largest budget items professionally and responsibly and watch your back in the ever-challenging legal disclosure arena. Most importantly, the right advertising agency will spend your ad dollars more effectively because they are the experts who understand the best possible way to reach the largest number of potential buyers at the lowest possible cost.
Before I tell you what the dirty little secrets are, let me tell why most agencies have them in the first place. It's for the very same reasons that have driven the sleaziest car dealers out of business in this era of enlightenment…the information age. Some folks need the shell game to survive. Their business philosophy has always been ‘treat em like mushrooms’ …keep them in the dark and feed them plenty of BS.
And then, of course, some people are just plain greedy.
Just as good car dealers are surviving and prospering in the new era, some ad agencies are re-thinking their operational philosophy. Many are getting rid of the dirty little secrets before those little secrets are revealed... which I am about to do.
Dirty Little Secret #1. - ‘Media buyers and agency executives on the take.’ One of the things that has angered me more than any issue with ad agencies in my 30 plus years of association with this field is the blatant disregard for a client’s best interest because of a media buyer’s relationship with a media outlet. Granted, these abuses are generally with the larger agencies in larger markets, but I’ve seen it up-close and personal in even the smallest of markets.
Some years ago I would occasionally visit a ‘media-watering hole’ in my city. In one little corner of this friendly bar, the top salespeople from broadcast outlets would ply the agency folks with unlimited booze and other favors, concert and sports tickets, restaurant meals and trips to the Caribbean. One of these media buyers, from the largest ad agency in town, would often reciprocate by making verbal commitments for spot or space placement right there…in that corner of the bar in the great state of inebriation.
Some years later, a close friend of mine who worked for a large media outlet in New York City told me that many of the media buyers in top metro markets never pay a dime for anything! From clothing to entertainment to meals. My friend admitted that she herself was guilty of ‘gifting’ and that it was often the only way to get face time with a buyer.
Any ad agency worth its salt should have an iron-clad employee policy agreement forbidding this type of thievery. At the end of this article, I’ll tell you how you can receive a free copy of the agreements we use at the agency I founded.
Dirty Little Secret #2. - ‘Non-disclosure of profits.’ Most agencies evaluate any client promotional opportunity for ‘the agency’s profit opportunity’ before submitting it to the client. An agency is entitled to a fair profit and markup for the involvement in a third-party deal, but the right policy is one of disclosure. Negotiate the best possible deal for the client then add a reasonable mark up.
Dirty Little Secret #3. - ‘Recommend the most profitable media venues for the AGENCY.’ While in Los Angeles at a media event last year I struck up a conversation with production manager of a well-known agency in that market. I was fishing for thoughts on new ideas to attract customers living in the ‘E’ era. “We can’t make any money on that!” exclaimed Ms. Production Manager. “Why would we give up the profit we make in television?” Shame, shame, shame. Is this how you want someone entrusted with spending your money to think?
When considering an agency, take time to explore new methods of compensation. For instance, you may be better off paying a monthly fee for services and consultation, rather than having your money spent only in areas that result in commission or compensation for the agency.
Dirty Little Secret #4. - ‘Kiting your media money.’ This is a very serious problem in the agency business. An ad agency sends you a bill for media. You pay the bill. The agency doesn’t pay the media for 60 to 90 days. And you don’t even know this is going on because the medium is afraid to upset the agency. So they just wait. A number of agencies have gone bankrupt (including some of the largest in the world) leaving media bills unpaid and clients responsible for their payment.
Tell your agency you want ‘net’ billing. When they approve media bills for payment, they forward these bills to you for direct payment, along with a bill for their commission. You kill two birds with one stone. You know exactly what the agency is making, and you are sure the bills get paid on time.
I’m proud of the accomplishments and contributions exceptional creative individuals and great ad agencies have made over the past 100 years in the field of advertising. But I don’t think there is any room for padding, puffing, and pilfering during times like these. You have a right to expect a professional agency to spend every single dime of your money as if it were their own. Full disclosure and above-board dealing is critical. And by the same token, you should be prepared to recognize and reward agencies who bring the best ideas to the table…even if those ideas are not their own, or where there is no built-in compensation.
If you’d like a free copy of the ‘employee gift policy’ that we instituted at our agency years ago, along with a ‘letter to the media’ putting them on notice of the policy, please email me at jboldebook@dealermagazine.com.
Do you have questions or comments about this or past AdTalk articles? Feel free to email them to CBC.
This issue of AdTalk is brought to you by Research Partners. Serving dealers for nearly 20 years to help reduce advertising cost: Research Partners
