COMMENT: Both sides will end up losers if rebates worsen in recession

On top of the terrible events of terrorism and war, 2001 ended with yet another sting in its tail for Asia's advertising agency fraternity. Just as we were about to close the year came news that an inhouse advertising agency belonging to one of Taiwan's conglomerates had pitched and won a multi-million dollar account by offering an unusually deep discount of 20-plus per cent (media, December 14).

Similarly, agencies in Hong Kong and China are also reporting that discount levels are vaulting upwards. Particularly worrying is this piece of yet unconfirmed news that a 4As agency in Hong Kong has been asked by its client to make its rebate policy retroactive for the past two years.

Discounts are to be expected when times are tough. But what should keep agency bosses up at night are the size of the rebates and the circumstances in which they are now being extended.

In Taiwan case, it's unclear whether ignorance or desperation drove Everbeauty, the inhouse advertising arm of the Evergreen Group, to chop its rates so deeply. That it did so will only encourage other marketers, using the recession as an excuse, to squeeze similar-sized rebates from their agencies.

The ever-steeper discounts provide further proof that the agency-client relationship has deteriorated to the point where agencies have slipped down the value chain in their clients' estimation.

Interestingly, media's new year poll (feature, pg14) found that the majority of client respondents were not entirely sure what they wanted from their advertising agencies. Just 31 per cent of respondents were satisfied with the performance of their agencies versus 27 per cent who were dissatisfied and a sizeable 42 per cent who were undecided.

As in any relationship, both sides have a lot to answer for the dismal state of the union.

Have agencies done such a poor job in providing the level of work and services clients expect of them? Have they over-promised and failed to deliver? Probably yes on both counts. Likewise, have marketers themselves done a poor job of communicating their strategies and brief to their agencies?

Have they been unrealistic with both their budgets and time frames? Again, yes on both counts.

Similarly, improving the relationship will need input and work from the two partners. And it will take more than just one or two agencies and clients to improve the agency-client relationship given the range of issues that can affect it, from the quality of work, business ethics, deadlines, trust and remuneration. If the rebate issue is left to deteriorate further, both sides will end up as the ultimate losers - clients will be short-changed on services and work and agencies, squeezed by tighter margins, will move inexorably closer to a shutdown.