Survey: Vast Majority of Procurement Execs Pressured to Cut Agency Fees Annually
The vast majority of marketer procurement executives are under at least some pressure to reduce agency fees each year, according to a new survey by consulting firm Ebiquity and its sister media-auditing company FirmDecisions.
The survey of 100 attendees, or roughly half of the marketer executives at last month's Association of National Advertisers Advertising Financial Management Conference, found 86% said they were under at least slight pressure to reduce agency fees annually, with 43% under moderate pressure and 20% "extremely pressured."
Despite talk from marketer execustives at the ANA conference about ways to get better quality work and improve relations with agencies, it's clear a key focus of procurement remains on old-fashioned cost cutting. That, of course, helps explain why surveys show procurement executives aren't popular with agencies. An ANA survey released last month showed only 10% of agency executives believe marketer procurement executives add any value.
Cost-cutting pressure also helps explain another result from the Ebiquity survey: 62% of marketer procuement people said media rebates are a somewhat or very hot topic in their organizations. "This rise of cost cutting has pushed agencies towards more opaque compensation models," Ebiquity said in its release on the survey.
Procurement executives "to some extent wouldn't be doing their jobs if they weren't looking to reduce costs," said FirmDecisions VP-North America Vivek Radia in an interview. But he agreed with GroupM Chairman Irwin Gotlieb's comments at the meeting that "because of those pressures, agencies may be put in a position that may not be ideal for somebody who's termed an agent."
Media rebates are still "nowhere near the problem in the U.S." as in the rest of the world, said FirmDecisions CEO Stephen Broderick. "It's not as bad as some people make it out. It is a little bit of a problem. So prevention rather than cure I think is the medicine of the day."
"Some agencies have dipped their toes in the ocean to see how far they can perhaps push it," he said. "And some clients have rightly said my contract doesn't allow that. I want the transparency you guaranteed."
How pressured are you to lower your agency compensation annually?
Extremely pressured -- 20%
Moderately pressured -- 43%
Slightly pressured -- 23%
Not pressured at all -- 14%
Within your organization, how hot is the topic of media rebates?
Very hot topic -- 20%
Somewhat hot topic -- 42%
Not too hot -- 26%
Not at all a hot topic -- 12%
How comfortable are you in navigating agency contract nuances such as rebates?
Very comfortable -- 29%
Somewhat comfortable -- 39%
Not too comfortable -- 24%
Not at all comfortable -- 8%
Source: Ebiquity, from survey of 100 marketer procurement executives at ANA Advertising Financial Management Conference, April 2015