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10 Areas Where Gen AI Needs to Be Addressed in Client-Agency Contracts

Contract updates are essential as Generative AI use becomes more prevalent in the marketing funnel.

Almost 80% of brand owners are using Generative AI today (WFA) for content ideation and creation, productivity, and efficiency. This speaks to how quickly the technology has permeated marketing ways of working and highlights the urgency for Generative AI to be addressed within client-agency contracts.

Industry bodies like the ANA and WFA have been proactive in facilitating awareness and discussion around addressing Generative AI in contractual agreements, though standards and requirements vary by market and region. Recommendations, in general, are for clauses to be added or amended to address issues of liability, compliance, governance, and intellectual property.

“The operative word when it comes to contractually addressing Generative AI use in marketing is approval,” says R3 Co-founder & Principal Greg Paull. “Is there approval for use, and what use case does that apply to. Every company has a different appetite for risk with varying levels of compliance, and getting approval from clients on use is the most important thing an agency can do.”

Oversight or Overkill?

Best practice in managing Generative AI use in the marketing supply chain includes regular reporting on AI use and data management, the auditing of AI-related processes and platforms, and testing the quality of outputs. One argument against high regulation of Generative AI in marketing is that it adds another layer of administration for clients and agencies and prevents innovation from taking place organically.

However, lack of compliance can be costly to finance and brand reputation. “Most agencies know the potential risks of AI and have set up some form of governance,” says Paull. “But making sure that work is safe – both for clients and consumers –should always be a priority.”

10 Key Areas to Address

Contract updates are essential as Generative AI use becomes more prevalent in the marketing funnel. In addition to incorporating Generative AI into any existing performance or platform evaluations currently implemented, marketers need to address its implications across 10 key areas. These are:

  1. Use of Generative AI broadly within the marketing supply chain
  2. Terms of use of Generative AI directly on outputs
  3. Governance over inputs into Generative AI platforms, including ownership and audit rights to prompts
  4. Governance over Generative AI outputs, including duty of the service provider to verify accuracy and reliability
  5. Process of review of Generative AI outputs
  6. Governance over the maintenance of AI models that have been developed by the agency and used within the scope of work
  7. Compliance with wider Client policy, including intellectual property
  8. Confidentiality on use of Generative AI in campaigns to anyone beyond the brand owner
  9. How time/fees are calculated for roles where Generative AI has a significant role in overall scope of work
  10. Third-party (i.e., subcontractors) compliance across the supply chain
R3 is a leading global, regional and local consultancy group, focused on improving the effectiveness and efficiency of marketers and their agencies. We enable our clients to get the competitive edge and a better return on investment from agencies, media and marketing spend. With over 100 people in the US, Asia, EMEA and LATAM, we work with twelve of the world's top twenty marketers.