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Nothing drives relationships better than strong, fair contracts

By Andras Vigh, Managing Director at FirmDecisions UK

One of the most important elements of a strong relationship in marketing services is the contract between the advertiser and its agency partners. The contract codifies and manages the relationship. Most importantly, it also protects rights and responsibilities on both sides and lays the groundwork for unforeseen events or circumstances..

Media and advertising contracts are by their very nature complex, managing, as they usually do, very large volumes of spend with a suite of tailored services, not to mention delivery that is measured in KPIs, research, and verification that ads have appeared as planned. What is perhaps surprising is how little time those on the front lines of both sides of the advertiser/ agency divide engage in contract negotiations or are aware of the finer details in the agreed document. Finance  and legal are often deeply involved, but I believe that there should be more focus in media, marketing, and account management in drawing up contracts and sharing the knowledge and responsibilities from the contract. Most importantly, these teams should be more involved in regularly updating the contract to accommodate changes and updates in the ever-changing world of media communications.

Updates are further complicated as in-house legal teams need continuous feedback and input from the marketing and procurement teams to revise and tailor the contract. Innovations typically first attract the attention of the marketing team. Working hand-in-hand with their procurement colleagues, they can then set the right KPIs and processes that in turn can guide necessary amendments to the legal text. While this represents good and due process, it is still somewhat a little two-dimensional, as it only captures learnings from the perspective of one advertiser rather than from the broader industry at large.

This is where industry trade bodies and associations come in, researching, preparing, and disseminating industry-standard contract templates and guidance based on common knowledge and experience from multiple points of view. The Incorporated Society of British Advertisers (ISBA) has recently updated its Media Services Framework Agreement. This is a template contract, drawn up by lawyers with extensive experience both client- and agency-side. The process was enhanced by a rigorous process of consultation with industry experts, including with our business, FirmDecisions. 

ISBA’s Framework Agreement is a great example of a modern, fit-for-purpose template contract that brings together wider market knowledge, context, and understanding. For advertisers, there are two principle advantages to using industry guidance such as the ISBA contract. First, it incorporates wider expertise than most advertisers could possibly hope to have in house, and so the contract covers more areas in greater depth.

By addressing more, potentially-unforeseen areas in more detail, this helps to make it future-proof. And second, as it becomes an industry standard, agency partners will increasingly and more readily accept its detailed clauses, meaning quicker and more straightforward implementation. These two advantages set the ISBA Framework Agreement up for success. 

The five key areas that any new advertiser-agency contract should cover, which are largely well-addressed in the new ISBA Framework Agreement.

  1. Innovative media practices:these include programmatic media, inventory media, and other media trading services that offer different buying methodologies and make transparent trading more challenging. In each case, full oversight of the money flow, data protection rights, approval processes, and potential penalties should be established. To deliver value, all buying methodologies should come with clear visibility around net pricing.
  2. Third parties: as the media landscape becomes increasingly complicated and more specialised, some functions are more often outsourced to specialist units or companies within agency holding company groups as well as independent, third-party suppliers. It is critical that advertisers have approval and oversight of all companies or divisions working on their behalf, as well as full visibility and transparency of all third-party vendors, ideally with comprehensive audit rights.
  3. Technical costs: as more than half of all media spend is now digital, more and more of a typical marketing budget is taken up by technical costs, for adserving, tracking, and data management tools. It is important to establish and codify how these are charged, priced, and used alongside KPIs for viewability, blacklisting, and other performance measures.
  4. Data ownership and usage: contracts need to specify transparency and approval procedures around data usage and ownership rights, during and after the contract expires.
  5. Transparency and audit rights: advertisers should make sure their contracts spell out the level of transparency that they’re happy with – up to 100% transparency, and including for all third-party businesses involved in any and all media trading done on their behalf.  This should include full audit rights for performance and contract/finance compliance.

These areas are all covered in the recently-updated ISBA Framework Agreement. It’s a great starting point from which many advertisers can benefit as they update and implement revised contracts with their agency partners. That said, the process doesn’t stop there.

Marketers need to continuously refine and update contracts to ensure they’re fit for the future. While this can feel painful and complicated at times, it’s well worth the time and effort. Fit-for-purpose contracts are the foundation of great client-agency partnerships.

Byline by Andras Vigh, Managing Director at FirmDecisions UK

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