“Biggest” is very definitely not the same as “only”. Yet when it comes to marketing investment – where media is typically the largest single bucket of expenditure, often around 40% of the total – traditionally brands tend to conduct contract compliance audits of their media agencies only. While it certainly makes sense to institute checks and balances where the lion’s share of the budget goes, similar levels of discipline, scrutiny, and savings can be achieved from the financial and contractual aspects of many other marketing agency partners, too.
As the marketing ecosystem has developed over the past 20 years and more, so marketing budgets have fragmented across many different categories of agency partners. Clearly, it’s only worth increasing the scope and reach of audits where you invest at scale. Nevertheless, this approach enables brand owners to put a program of audits in place, providing both regular governance and detailed financial control.
Different strokes for different folks
Each different type of agency partner presents different reasons to audit and different risks. Here, we consider three.
- Creative and production
WHY AUDIT? Creative and production fall under the marketing and procurement umbrella. Often, these services are provided by the same holding company as the media agency, and auditing here can create improved leverage. Creative and production is often fraught with issues of transparency, particularly regarding the remuneration for FTEs, studio charges and pass-through costs, both directly and from related third parties. Cash flow is often an issue, and creative and production is second only to media agency contracts in terms of spend and risk.
KEY RISKS: Scale and transparency
- Experiential, sponsorship, and event management
WHY AUDIT? All the reasons ‘why’ for creative and production are also germane for experiential, sponsorship, and event management. In addition, in the latter sectors it’s often not clear whether the individuals delivering these programs are included in the fee and which are included in pass-through costs, leading to frequent double-billing. Related, specialist third- and fourth parties frequently generate hidden mark-ups, and there are often disputes over cash flow, asset and inventory management, and the reconciliation of often complex projects. And by the very nature of live experiences and events, late – often out-of-contract – changes are made in order to make them happen.
KEY RISKS: treatment of staff costs, hidden mark-ups and last-minute changes
- Influencer marketing
WHY AUDIT? Given the very real value of independent (or quasi-independent) third party endorsement, influencer marketing has grown enormously in the age of social media. Having influencers try, test, and endorse your product or service can bring with it huge credibility and speak directly to consumers. As this media and production channel has grown rapidly governance, checks and balances have lagged. Many agencies that handle and represent influencers are attempting to establish a non-disclosed model, which is not in advertisers’ best interests. IP and reputational issues are a particular area of concern.
KEY RISKS: non-disclosed model and contract status
Recommendations for success
The auditing principle of “trust but verify” relates to all the agency types detailed in Figure 1., above, and other service providers, including, for example, legal and fleet management. Any contract which has scale, transparency issues, fees, pass-through costs, and the potential for rebates and discounts, can and should be audited. Best practice suggests that you should do the following:
- Have a contract that’s comprehensive and fit-for-purpose for the specific – and often very different – types of agency partners you’re working with. Generic marketing agreements often don’t address control issues specific to all disciplines.
- Ensure that your scope of work is complete, specifying what’s included and what’s excluded. With a comprehensive SOW and proper documents, you’ll have the necessary controls in place.
- Audit every agency partnership where you invest at scale.
Summing up
Taking this approach allows you to identify, enshrine, and share best practice, corporate governance, and process improvements. These, in turn, will enable you to secure financial returns and stretch your marketing budgets.
