Principal-based buying – the practice of purchasing inventory in bulk at a discounted rate and reselling it to clients at a markup – has recently sparked much debate.
Media arbitrage is not new. But an ANA report released in May, which found that principal-based buying is on the rise, has reignited its controversial rep among advertisers.
Although there could be some benefits, like cost savings passed down to clients, there’s also the potential for a conflict of interest between marketers and their agencies.
Wendy Clark, president of consulting firm Consello Group, can understand both sides of this conversation, she says on this week’s episode of AdExchanger Talks.
She was the global CEO of Dentsu for two and a half years before joining Consello last April, and she also spent time in top marketing roles on the brand side at Coca-Cola and AT&T.
Clark sees the renewed discussion around principal-based buying as a symptom of a larger issue: the lack of open dialogue between brands and their agencies.
For example, contracts often aren’t written clearly and transparently. They don’t include measures that allow brands to audit what they’re buying or provisions that tie compensation to performance, Clark says.
“Things which, quite frankly, I find to be fairly fundamental, are relatively missing in many, many relationship contracts,” she says.
Brands should take the reins, advocate for themselves, demand more visibility and make sure their expectations are being met by the terms of their contracts. Otherwise, there will be unwelcome “surprises,” Clark says.
It’s worth sweating the details. Are you aware of whether your agency is doing principle-based buying? Do you have auditing rights? Are there accountability measures in your contracts? “These are things that you should know,” she says. “This is just good hygiene.”
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“If you do your homework, generally speaking,” Clark says, “you’ve set yourself up for success.”
Also in this episode: Is the agency holding company model broken? How should agencies charge for their services in the age of AI? And Clark’s direct connection to the late Queen Elizabeth II of England.
For more articles featuring Wendy Clark, click here.
