Your Agency’s Conflicts of Interest May Be Costing You Money

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The goal of advertising is to make a business money, but conflicts of interest are all too common. Agencies talk a big game about protecting their clients’ long-term interests, but many agencies fail to serve their clients first when their financial incentives don’t align.

As a marketer, you need to know your agency’s potential conflicts of interest to make sure you’re getting the results you’re paying for.

Red Flags

At the root of agency conflicts of interest is a historical payment system based on percentage of ad spends. That motivates agencies to increase their revenue by spending more on paid advertising.

The biggest culprits include display advertising fraud, pay-per-click (PPC) advertising, and commission-based affiliate marketing.

Display advertising fraud

Display advertising fraud is a huge issue. Advertisers devote billions of dollars to online display ads, often purchased “programmatically” or through buying software that automatically places ads on sites that fit a brand’s media plan.

However, at least 36% of clicks from display ads may be fake. So, marketers not only pay a lot of money for worthless traffic, but agencies also have little motivation to fight fraud—they’re compensated on a percentage of spend and want increased volume.

Networks that reduce fraud also tend to have lower available impressions, meaning they often lose the largest buyers’ business.

PPC models

The PPC model also can compromise agency integrity. Many agencies managing PPC on behalf of brands charge a percentage of spend without any tie to ROI, which financially motivates them to continue to spend more on campaigns.

In theory, this model benefits clients and agencies. Clients want large campaigns that generate a lot of revenue, and agencies want large campaigns to increase their percentage of spend yield.

However, in practice, this incentivizes against cost-efficient campaigns. Even if a customer could attract the same amount of revenue with a smaller ad spend, the agency may keep ad spend high to protect its profits.

Affiliate networks and program management services

Finally, affiliate networks and affiliate program management services have a conflict of interest based on their business model. Rather than charge a standard fee for tracking services, large affiliate networks generally earn fees as a percentage of affiliates’ paid commissions or total sales.

What marketers may not realize is that these same networks have publisher development teams that work with affiliates to increase sales and commissions with their advertisers. As more affiliate revenue is generated and higher commissions are earned, the network and the affiliate benefit. It’s like having Google managing your PPC spend.

For example, when Bitly partnered with VigLink earlier this year, there were major implications for many affiliate marketing programs. Bitly, a URL-shortening service, generates 8 billion clicks per month and is used by both bloggers and many companies’ social media departments.

But the new partnership replaced these direct links with VigLink links, meaning revenue from resulting sales went to VigLink and Bitly when a payment normally would not have been issued. Very few affiliate networks, if any, notified their clients because they had no incentive to do so.

In contrast, independent agencies (not tied to the same financial metrics) were very vocal in warning clients about this change and were quick to publish articles and create awareness. Those agencies acted in the best interest of their clients because there was an incentive to do so.

How to Manage Agency Conflicts of Interest

Be aware of these conflicts of interest. Strongly reconsider paying your agency based on a percentage of spend.

Here are three steps you can take to align agency incentives and behaviors.

1. Enter agency conversations with your eyes wide open

Just as you wouldn’t buy a car without researching prices, you shouldn’t accept an agency’s ad spend proposal without understanding where your money is going. It’s up to you to know enough to protect yourself. For example, did you know that display advertising vendors often mark up media buys by 50% or more?

Research will enable you to confidently ask the right questions. Stay up to date on industry practices, and have frank discussions with your agency about how it spends your money and earns its own.

2. Motivate your agency to focus on ROI

The best agencies incentivize employees to treat your money like their own. Your account manager’s pay shouldn’t depend on your ad spend. Rather than pay your agency a percentage of ad spend, look for an agency with a flat fee or “return on ad spend” revenue model.

Paying a fixed fee encourages the agency to increase profits by keeping costs down and ensures you won’t spend more than you bargained for. The ROAS (return on advertising spend) model ties an agency’s profit to hitting growth and efficiency targets, and motivates it to take ownership of your goals.

3. Insist on no kickbacks and request full disclosure

You need to know where your partners make their money.

When companies promote partner products or networks, ethical questions can get murky. If your agency is double-dipping, you could pay the price. Markups and kickbacks should be affirmatively disclosed.

We had a client who left his agency and was approached directly by a provider who had been working through the agency. The provider offered its tool for 25% of what the client had been paying; the rest was a markup.

State clearly to your agency that you don’t want it accepting gratuities from partner companies for spending your money with them. You deserve to know how your money is spent, and a reputable agency will care about decreasing your costs and increasing your ROI.

* * *

Hiring an agency is a smart move. There simply aren’t enough hours in the day to manage your marketing initiatives, and some degree of trust has to exist in that relationship. But if you trust your agency blindly, you could get burned.

Educating yourself will allow you to establish a mutually beneficial relationship with your agency and get better results.

MarketingProfs All In One

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Managing Social Media Chatter, Complaints, Conflicts and Crises

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Managing Social Media Chatter, Complaints, Conflicts and Crises image tips to avoid social media crisisWhat do Dominos, DKNY, Burger King, Chick-Fil-A, the Red Cross, KitchenAid, Applebee’s and Paula Dean all have in common?

They’ve all had painful social media mishaps. Some of these brands were able to minimize the negative impact by handling their situations quickly and wisely; others will go down in history as “socially awkward.”

With social media, you don’t have to be a big brand to have a big blow-up. A little forethought and adherence to four basic guidelines will prepare you to handle the occasional faux pas that may come your way.

Create A Social Media Plan

A social media plan outlines a your promotion and engagement protocol, the platforms you’ll be using and even your daily routines. It should also include instructions for dealing with potentially damaging situations. As you’re developing that part of the plan, it’s wise to anticipate a wide array of possible issues, no matter how off the wall they might seem, and determine how you’ll handle each:

  • Identify the types of communications and the response each requires. A customer complaint about your price should be handled much differently than a rumor about product contamination – something that could turn into a full-blown brand reputation crisis
  • Assign people within your organization to handle the situation based on the type of communication. It’s easier to maintain a consistent and effective approach if you categorize situations based on their potential “hazard” and have the same people respond to the same types of situations
  • Develop an internal communications plan that puts everyone on the same page regarding the company’s position and messaging around things like product performance complaints, missed shipments, quality, etc. You don’t want one representative flying solo and promising something the company can’t (or won’t) deliver on
  • As part of your regular engagement strategy, encourage venting, sharing and conflict discussion by your followers. Many companies are afraid of the occasional negative comment, but giving your followers a way to share their concerns gives you the opportunity to resolve issues and even have your advocates help you out. It also presents you as confident, collaborative and focused on giving customers what they’re looking for

Monitor

Many times, customer service issues are tweeted or posted with the expectation that someone is watching on the other end ready to respond. Because your community is undoubtedly talking, you have to be listening so you can get ahead of the situation before it snowballs. Make sure you have an effective process in place that:

  • Allows easy monitoring of all platforms on a single dashboard
  • Sends alerts triggered by keywords or hashtags signaling potential issues for your company
  • Identifies spikes in engagement – this can be an early warning sign that chatter’s picking up

Respond

How you respond to a situation can arguably be more important than the challenge itself. A well-prepared, well-crafted response can actually result in kudos for you and increase your followers – as in the case of Burger King and DKNY. A panicked response can create bad press that’ll live on long after memory of the crisis dies. So what should you do?

  • Acknowledge and clarify the specifics of the situation immediately
  • Respond authentically, not automatically
  • Be honest and transparent; admit if there was a mishap and what will be done to rectify the situation
  • Encourage interaction with you, not community at large
  • Respond first on the platform where the communication started/took place. If the flare-up happened on Facebook, respond there first – it won’t help to jump platforms if the conversation and chaos are happening within another audience. After that initial response, go ahead and expand to other outlets if you believe the situation will “spread,” develop a dedicated microsite to house your official responses and messages if the situation warrants, and direct anyone interested to that site
  • Encourage company employees to use their own social media accounts to share  information about an incident; make sure their messages are calm and straightforward, not incendiary, and accurately reflect your company’s position
  • Don’t delete community comments. Address them fairly and follow up off-line with any individual trouble spots
  • Know when to take it offline – reach out personally. Sometimes people just like to pick fights and nothing you say will dilute their ire. In many cases, a phone call and sincere effort to rectify the situation keeps the situation from becoming out-of-control

Review

Take a breath. The sun will still rise tomorrow and hopefully you’ve handled the situation as well as possible. But now what? It’s important to do a post-mortem to understand what worked, what didn’t and what needs to be changed for future events. A few questions to ask yourself are:

  • What happened, why and was it preventable?
  • What was the resolution and what measures are now in place to keep this from happening again?
  • What was the extent of the spread?
  • Did internal communication flow effectively?
  • Did the plan work as anticipated? If not, why not?
  • What long-term ramifications will need to be dealt with?

You can’t entirely avoid social media conflict and the potential it has to cause problems for your brand. But by having a plan, being alert to what’s being said, and tackling each issue quickly and appropriately, you’ll find that social media engagement is a manageable process that will provide many more positives than negatives.

Managing Social Media Chatter, Complaints, Conflicts and Crises image b94d13c5 ce6f 4499 b81e da8b468762e4

 

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Social Articles | Business 2 Community

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