Expertise Beyond the Numbers

Agency Contract Compliance Audits Vital in Time of Significant Marketing Budget Cuts

The following blog post highlights how major consumer brands are beginning to make significant cuts in their advertising and marketing budgets. This move reinforces the need for the right marketing agency contract compliance audits to enhance overall return-on-investment (ROI) on dollars spent.

In an economy that has become accustomed to perpetual corporate cost cutting, major consumer brands like Proctor & Gamble (P&G) are once again taking a serious look at their current advertising, public relations, and marketing agency relationships.

In fact, according to this recent Wall Street Journal article, P&G is looking to make deep cuts in the number of advertising agencies it works with in an effort to save more than a half-a-billion dollars in fees the company pays to outside firms.

This dynamic business environment means that many previously secure agency accounts will be up for review. P&G is not the only advertiser scrutinizing contracts for earnings enhancements while also expecting their agencies to deliver cutting edge services in a world rapidly adjusting to mobile, social, and non-traditional media.

Unsurprisingly, there are signs of disharmony in otherwise close relationships between agencies and their clients. According to a recent study from the Association of National Advertisers, 40 percent of agencies believe that they are fairly compensated. Conversely, 72 percent of clients believe that they are paying their agencies appropriately.

Astute agencies have realized that aligning value perceptions requires engagement with new stakeholders, especially their client’s procurement and finance organizations. The need to establish trust with these stakeholders has led some agencies to rethink their approach to transparency.

Many agencies are embracing the concept of independent contract compliance audits in order to increase trust and enhance their overall client relationships. These agencies have realized that increasing transparency can improve the value perception of fiscally minded stakeholders in procurement and finance.

Contract compliance audits also enable Chief Marketing Officers to demonstrate the effectiveness of internal controls and objectively validate contract performance. Proactive attention to minor issues noted also leads to more substantial earnings enhancements as process improvements are implemented across the organization.

Usually, the greatest value realized with contract audits is the improved alignment between the agency and the advertiser. Well executed audits create a safe zone where mutual pain points such as approval processes and unexpected project changes can be evaluated in a thoughtful manner.   The end result is a stronger and longer lasting relationship.

All parties benefit from a reduction in agency turnover. It is expensive and inefficient for advertisers to change agencies, not to mention detrimental to the agencies that lose a large account. The business landscape is more competitive than ever, and all parties have far too much at stake to allow value perceptions to disrupt harmony in the most important of business relationships.

Please be sure to read this white paper from the SC&H Group Contract Compliance Audit Services (CCAS) practice about how marketing contract compliance audits can help strengthen partner relationships, enhance ROI, and improve overall outcomes.

Patrick Gahagan, a Director in the CCAS practice, offers additional insights into the true value of agency contract compliance audits in the following SC&H Group podcast.

If you would like to learn more about how contract compliance audits can help enhance your marketing efforts, please contact SC&H Group’s CCAS team here.