CONTRACT AUDIT

One of the most important retail and e-commerce companies in Mexico, thanks to the contract audit, discovers that its media agency is not fulfilling contractual commitments. Media Auditors manages to identify up to 11MM Mexican pesos to be returned by the media agency

ABOUT OUR CLIENT

An important retailer, which operates numerous stores in Mexico and which has different types of businesses. It is among the top 100 advertisers in the country, with a media investment level of approximately 330MM Mexican pesos, a marketing strategy focused on its core target and more than 50% of its investment dedicated to television and digital to boost its e-commerce platform.

THE CHALLENGE

We find ourselves with a client who has just come out of a Pitch and starts working with his new agency. There´s much uncertainty, and above all expectations from the client towards the new team and all the commitments made during the contest.

Generally, in a Pitch process, agencies usually promise a series of results that, in practice, can become very difficult to achieve, all in an effort to win the account and/or keep it. If clients are properly advised, they include all the commitments made by the agency during the contest in their service contract, and as a general market practice, auditing media agencies is always necessary, especially when it is a new agency.

  • What we found in this project was a client with the following questions:
  • Will the agency be able to meet media optimization commitments?
  • Will the team be oversized for my account?
  • Will they manage to keep the team and control the rotation?
  • Is the level of rebates in line with the market? Will it be returned in full? Will there really be transparency?

WHAT WE DID

First, Media Auditors conducted a thorough analysis of the contract between the client and their agency, identifying all commitments.

 

Once the points to be audited were defined, Media Auditors began the audit process by agreeing with the agency on the times and processes. A series of templates were sent with the information that was required and the deadlines were detailed.

 

After analyzing all the data and information from the audit, a draft of the results was presented to the agency, thus giving an opportunity to justify and clarify any issue. After reconciling results with the agency, a presentation was made to the client.

Deliverables: Compliance with delivery in time and form of all reports stipulated in the contract and required by the client.

Work Team: FTEs, rotation, ins and out, salaries and team size according to budget.

Optimization of mediums: It is reviewed if the optimization commitments are being fulfilled.

Billing: The amounts billed by the agency to the client must match the amounts paid by the agency to the medium.

Remuneration: According to the audit of teams, the real costs they have had per team per year are calculated versus the one stipulated by contract.

Rebates: Compliance with the return of rebates as stated in the contract and analysis of levels versus market.

THE RESULTS

Some of the most important points identified by the audit were:

  • The agency must return more than 80 thousand pesos to the client as compensation.
  • The agency must return to the client SIX AND A HALF MILLION Mexican pesos for the concept of NOT complying with optimizations in the media.
  • Only 77% of the deliverables were fulfilled in a timely manner.
  • The work team had a rotation of 56%, while in the market the average rotation is 44%.
  • The size of the team is greater than the market average. The investment of the team by FTEs of the client is 28.6 MM while the market is 29.7 MM.
  • The difference between the committed and actual rebates is ALMOST 5 MILLION Mexican pesos in favor of the client.

In summary, Media Auditors helped the client to clarify their concerns:

  • The agency has not been able to meet the commitments made for media optimizations, since they were unrealistic and the agency made them with the aim of winning the account during the contest.
  • The work team is slightly oversized for the budget they are working with.
  • The team’s turnover has been high compared to the market average.
  • The actual rebates achieved were greater than those stipulated by contract, but the agency will return all of them to maintain transparency.

Additionally, the audit findings help to identify that the current contract is not aligned with the reality of the market, so at the end of the service, Media Auditors proceeded to advise the client on the adequacy of contractual commitments adapted to current trends in the industry.

11MM OF PESOS RECOVERY FOR THE CLIENT
3,46% OVER ITS INVESTMENT IN MEDIA
AUDIT PAY BACK: 69 TIMES OF THAT INVESTED

Crédito de Imagen: «Designed by Freepik»

 

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