Questions raised over Unilever's decision to stick with incumbent media agencies

The apparent, still unofficial, decision, which has taken the FMCG giant nearly four months to reach, leaves Omnicom’s PHD handling media buying and planning in Greater China (Hong Kong, Taiwan and China) and digital in India and New Zealand. GroupM’s Mindshare will retain media duties in much of Asia-Pacific including India, Australia, Malaysia, Singapore, Thailand, Vietnam and Indonesia.

Elsewhere in the world, Mindshare has retained Unilever’s account in Western Europe, while PHD has likewise retained its share in Central and Eastern Europe. In June, PHD was picked to handle the bulk of Unilever’s global media buying business.

Both Mindshare and PHD declined to comment for this story.

Some have called into question the necessity of the drawn out competitive pitch, which tied up the resources of at least three media agencies (PHD, Mindshare and Initiative). It has been said that the point of the process was to negotiate lower fees and buying rates for the client. In so doing, agencies not only pay in terms of time and money, but also run the risk of losing the intellectual property they present during pitches.

“Unfortunately, there is a trend around media rebates,” commented Goh Shu Fen, owner and founder of consultancy group, R3, adding that clients are interested in recouping the rebates paid to agencies in return for spending client money with key media owners. “It’s less about agency fees, which are a small percentage of the budget.”

“Client media budgets aren’t keeping up with inflation," she added. "Furthermore, media diversification has stretched these budgets further as companies need to make their dollar reach increasingly fragmented audiences.”

Media rebates have become an increasingly sticky issue in the region. A study by the World Federation of Advertisers (WFA) found that many marketers in Asia-Pacific believe that the level of rebate is higher than what they believe is being returned to the client in a number of markets—specifically China, Indonesia and the Philippines.

A study by R3 on the subject in August found that marketers don’t believe agencies should be allowed to keep rebate or incentive dollars and that doing so damages the agency’s objectivity.

“While the resources poured into pitches are intensive, not just for agencies but for the client, there is evidence that clients benefit from this exercise commercially," Goh said. "And until there is a better process, this practice won’t be going away soon.”

To work against this practice continuing, media agencies need a strategy to combat the commoditisation of their business by creating such value that it would be more painful for clients to switch agencies, she advised. “They need to offer business rather than just media solutions.”

Goh concluded that agencies could also opt to be more proactive in negotiating their value with clients, bringing the issue to the table before a competitive pitch is called.