Should we join the ‘Rebate Debate’?

Should we join the ‘Rebate Debate’?

Interesting state-of-play update from McKinsey, who look to be ‘joining the debate’ on media agency transparency.

https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/truth-in-advertising

As you might expect, the article contains a good deal of common-sense advice to avoid being done over by your media agency. However, is there a danger here that in latching on to a topical (well, 2016) theme we run the risk of missing out on the bigger picture.

If McKinsey can find stock photos of transparent chess pieces, so can we

 

Sure, the sums involved in media rebates can be large (McKinsey quote from 5% for TV and Radio to 20-35% for digital). Sure, more transparency can only be a good thing in the current mess. But, the sums involved – and their subsequent impact on marketing return on investment – are small compared to the costs of making the wrong decisions – that is supporting the wrong products with the wrong media to the wrong extent.

 

“Your rebate? Riiiiight. Good question, and I’m really glad you asked that. You see, it’s like this…”

 

The financial impact of this decision dwarfs that of the rebate debate. The difference, in ROI terms, between investing the wrong amount in an inefficient medium to support an unresponsive product, and doing the opposite of all that (i.e. getting the investment decision right) can mean the difference between pounds and pence – much more than the, perhaps, 10% overall at stake with the rebate question.

The point is that the rebate debate is easier to enter. Arguably, all advertisers should have entered it eons ago. The fact that we’re only now (well, in 2016) wrestling with this question is testimony to I-don’t-know-what on both sides of the advertiser-agency relationship. And the solution is largely one of process and good business practice which, taken together, amounts essentially to this: when buying anything, know (a) how much it costs and (b) how much you’re paying for it.

 

Three employees avidly scrutinising the latest rebate information from their agency

 

It’s much harder by comparison to make the right investment decisions in the first place. That requires advanced analytical techniques, insight, commercial acumen and the courage to follow the evidence where it takes you. But then again, the prize is so much bigger that it’s surely worth doing, and doing well.

 

Another happy rebate discussion. With photos

 

So, by all means, push your agency to be more transparent about the price they are paying for your media, but don’t neglect the bigger picture. Find out where your media pays back best – which products to advertise, using which media and how much – and put your money there.

Philip Gaudoin

 

By |2018-09-04T08:21:25+00:00May 9th, 2018|Media|

About the Author: