Cautioning not to get carried away by 'hear-say' about some stray instances, the Advertising Agencies Association of India (AAAI) has advised its member agencies not to violate the INS rules on their 15% commission.
The Indian Newspaper Society (INS) in a communication to its accredited ad agencies has warned that it is going to 'carefully scrutinize the operations of accredited agencies as and when required and disaccredit agencies that are found to have violated the INS rules and regulations.' AAAI pointed this INS communication to its members in a special notification sent by its President, Sam Balsara. Based on both number and volume, majority of the business conducted by its member agencies is on 15% commission, claims by AAAI.
Speaking to exchange4media, Preet K Bedi, CEO of TBWA\Anthem said, "As far as my knowledge is concerned, more than 90% of the agencies work on 15% only. All this hue and cry about agencies compromising 15% is a creation of media only especially a leading business daily which did speculative and ill researched story based on limited facts."
Santosh Desai, Executive Vice President, McCann-Erickson says, "Generally it is the smaller agencies which tries to lure clients by offering a percentage of the 15% commission to them. But by and large, the big agencies desist from such tactics of discounting."
AAAI accepts that 'a handful of advertisers who for a variety of reasons may be operating on a commission or fee that is lower than 15% but claims that a few exceptions do not make the rule.' It admits that under certain circumstances there may be a deviation on this say for example, when the media buying or media planning plus buying are separately paid for.
Stressing on the adequate compensation to the agencies, AAAI further says that large and major professional advertisers recognize the importance of remunerating their agencies well. This allows agencies to have decent margins to invest in people and resources to enable agencies to create effective advertising. Though there has been a trend towards fee system but it does not suit majority of the small and medium advertisers as it often lead to avoidable disputes and souring of relationships.