Levi's Asks for Transparency and Media Buyers Balk
Media buyers are shocked — shocked! — that Levi’s wants to get an accurate idea of what agencies are paying for their ad buys. This is presented as some sort of confidentiality breach in today’s Ad Age, which says that in the jeansmaker’s recent agency review Levi’s asked “shops to reveal sensitive price data for other clients …[that] could conceivably be used to determine what their other clients were paying for media.” The mag termed it “an unusual and controversial demand.”
But if you look at this issue from the client’s point of view, it quickly becomes clear that the real scandal is media buyers’ lack of transparency on pricing issues, not clients who want to know what everyone else is paying.
Think of it this way: If you went to buy a car but upon arrival at the dealership found that none of the roadsters had prices on them, you’d be a little bit leery if the salesman told you that the price was $20,000, as low as he could go. You’d probably want to know what everyone else was paying, even at other sales lots, before writing out a check.
It’s the same in virtually every other market for every other type of product — from the stock exchange to the supermarket. Prices are on full display for everyone to see, and everyone knows who’s paying what.
But not in the advertising world. On Madison Avenue, if you want to know what your competitors (or even non-competitors) are paying for their media, and what agencies are charging them to handle it, then suddenly everyone gets all huffy about “client confidentiality” and “best practices.”
Price transparency has the effect of driving prices down, not up, for both media providers (such as TV networks) and the agencies that handle the buys. As long as clients are in the dark about whether they’re getting good deal or not, prices can rise incrementally and agencies’ cut of the business creeps up with it.
This is why media agencies have expended so much energy over the last few years trying to keep media prices as opaque as possible. Consider: In February, Irwin Gotlieb of GroupM floated the idea that media agencies ought to be able to keep volume discounts on their media buys, even though it’s the clients’ money that earned them and most agency-client contracts have language requiring bills to be paid at net not gross. Burger King even approved of the idea — which is illegal in parts of Europe! Gotlieb insisted his effort would be transparent, but it is hard to figure out how having two streams of money going in opposite directions between seller, agency and client will make it easier for clients to understand whether they’re getting a good deal or not — especially if the agency gets to keep one of those streams when it didn’t before.
In 2005, IPG had to give back $250 million to its clients after it wrongly kept media kickbacks — hilariously referred to as “agency volume bonification” at the time — over a period of years and was forced to restate its accounts.
More recently, former Wal-Mart svp marketing Julie Roehm and Microsoft global media director Michael Grubb tried to get an electronic media auction exchange going. That effort was derailed partly by Roehm’s love life. The site where it was supposed to exist is currently closed after it experienced resistance from cable TV sellers.
Think about that: Why would someone selling something not want a freely traded exchange on which to offer their wares? Answer: Because they know that as soon as everyone finds out what the real prices of inventory are, then the prices will fall.
So clients who hear their media agencies telling them scare stories about client confidentiality might want to ask themselves exactly whose confidence is really at risk here: The agencies and sellers who have an interest in keeping prices opaque and high, or the clients who still don’t have a transparent market in which to do business.
Photo from Flickr user China Guccio, CC.
Jim Edwards, a former managing editor of Adweek, has covered drug marketing at Brandweek for four years, and is a former Knight-Bagehot fellow at Columbia University's business and journalism schools. Follow him on Twitter or send him an email.
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