25 November 2010 | Nick Manning
Procurement is becoming an increasingly important part of hiring media agency services. Nick Manning identifies the top tips…
In an industry unused to the rigour common in other lines of business, there are numerous stories about ‘bad’ procurement in the media sector, with particular criticism of e-procurement. However, the reality is that procurement professionals have become increasingly adept at working with media agencies to achieve a fair, but demanding result for all parties in most cases. So here are 10 tips for a better process, not just in pitches, but also as part of a continuous evaluation programme to ensure existing relationships are successful for all concerned.
1
Agree in house before you start
If there are different client stakeholders involved in a pitch or contract re-negotiation, then these stakeholder groups will often have varying views on the desired outcome. To avoid this, conduct comprehensive and independent due diligence in advance to produce a commonly agreed brief around a set of shared objectives. Once you have an agreed brief, you then need unambiguous leadership and decision authority, with real clarity for the agencies that are taking part.
2
Evaluate every aspect of
an agency’s service
Cost may be key, but better pricing won’t rescue a bad plan. Great planning is rooted in a deep understanding of brand objectives, consumer insights and a balanced and imaginative use of a breadth of media options including the role path-to-purchase influences, such as social media, play.
Media agencies can help advertisers in many ways, such as with the newer digital disciplines, including search, mobile, ROI analytics and content-led services. Take an
all-round view of the total contribution the agency can make beyond the core discipline of media planning and buying. A well-crafted brief that asks the agency to demonstrate its strategic mettle across multiple channels is essential.
Agencies’ capabilities vary widely, so proper evaluation is vital. Clients also need to assess whether the agency is keeping its own costs under control. Some independent due diligence will stop inefficiencies throughout the life of the contract.
3
Place effectiveness ahead of efficiency
Pitches and contract reviews should not be decided on media buying pricing alone. An agency’s contribution should be measured through effectiveness techniques too. Advertisers need to know they are investing in the right channels, at the right weight, at the right time and intervals, and that their budgets are optimised. Ask agencies how their recommendations are going to be measured and their methods for doing so. Interrogation of an agency’s effectiveness approach should be a key part of any RFP.
4
Don’t treat media
as a commodity
Although some metrics can be applied cross-border and between agencies, not all GRPs [gross rating points – a media currency which indicates the size of a campaign] are the same. Cost can vary enormously, even within the same country.
The cost of media cannot be divorced from its context, so extra care is needed to compare like with like. An agency’s buying offer must also be related to its strategic and planning approach, otherwise the planners will be planning one thing and the buyers buying another. A well-structured approach can allow comparisons that take planning and buying ability into account.
5
get the right people
on your business
An agency is only as good as the people it employs, so attention must be paid to the track-record of the proposed team, their specific role and their level of involvement. It’s not unusual for agency personnel to be promised at more than 100 per cent of working hours. Clients should recognise that agencies will always find it hard to balance pitch work with on-going business, but should ask the agency to guarantee that no key individual will be paid for at more than 100 per cent utilisation. Clients should also ensure that nominated individuals remain engaged at the relevant level. People will come and go, so discussion about replacement needs to be anticipated in the contract.
6
Set measurable targets
and appraise clearly
It is in everyone’s interests for achievement targets to be transparent. These are usually buying targets, but a more widely defined set of KPIs should be considered to embrace quality of service, strategic and planning performance as well.
Clients should be looking for a programme of continuous improvement in the effectiveness and efficiency of their brand communications. Agencies should be incentivised against improvements across the life of the contract. A continuous review process should be set out at the start and should be agreed with scoring criteria and reward mechanisms. The agency should be tasked with contract compliance.
A proper system for handling missed guarantees should be agreed upfront, and agencies should be able to warn their clients of an impending ‘miss’ with a rationale
and the relevant mechanism for handling value shortfalls.
7
Remunerate generously for superior performance
The media agency should be properly remunerated for the quality of its deliverables as measured across the life of the contract, with incentive programmes in place for outstanding performance. Equally, low scores should trigger a downward fee adjustment according to a pre-agreed matrix.
Ideally, strategy and planning should be fee not commission-based, as many great ideas are the product of labour-intensive analysis, and the best strategies normally involve free or low-cost channels, such as social media. Paying the right rate guarantees the continuity of senior talent and encourages a disproportionate share of senior management attention.
Fee and commission negotiations should also include agreed policies on transparency. Clients should establish an open dialogue with the agency concerning rebates, unbilled media, extended payment terms and other financial elements. These should be viewed alongside fees and commissions.
Agreements need to have the right to financial and media audit for contract compliance purposes.
8
Pitching isn’t always
the right solution
It’s tempting to think the best outcome can only be achieved through a pitch. However, a well-structured approach to a contract review can yield an equivalent result without the disruption of the pitch process. Clients sometimes under-estimate how much effort agencies put into pitches. It is also not uncommon for an agency to take part in a pitch when it shouldn’t, often because it is too busy to prepare properly.
Where there is a pitch, clients should check beforehand that an agency is well-placed to participate and that the necessary resource will be provided. Clients should only pitch when they genuinely believe that there is no better route.
9
If it looks too good,
it probably is
The past two years have seen an escalation in the offers agencies are prepared to make to win or keep business. It is easy for clients to assume agencies commit to guarantees they know they can underwrite. However, they often have to estimate target buying-rates without knowing about previous history. They are in effect flying blind when they guarantee price reductions. They are also gambling if they promise unrealistic caps on media inflation.
The adoption of e-procurement tools can encourage blind price promises, and while this can be
seen as “the agency’s problem”,
it is in the longer-term interests of the client to agree terms that all parties accept as demanding,
but deliverable.
10
Great value right to the end of the contract
Under-delivery can occur in the final year of a contract, particularly if the agency believes it is likely to lose the business. Avoid this by having a fixed contract with an agreed review period for renewal, as opposed to announcing a pitch when the contract is still ‘live’. Guidelines should be negotiated for the final period of the contract, covering delivered value and service, to prevent any possibility of a drop-off in performance.
