8 December 2011 | David Meikle
There are many more savings to be made from media plans if
we measure the value of our media agencies differently and apply a little more
trust, argues David Meikle.
Over the past two decades, not only has the number of TV and radio channels exploded, but the number of magazine titles has increased, online media has taken off and technology now enables us to view TV commercials in newspapers on the internet.
However, has our means of assessing media
value kept apace?
When there were only a few TV channels, we could be confident in media value if our agency bought well, compared to the rest of the market. But in this new and complex media landscape, how well do we really buy our media space and time?
The fact is that the majority – the market – is not always right. Unless we adopt new ways of measuring and managing the performance of our media agencies, we are missing out on potential savings and better value for the money we do spend.
Negotiating a good deal
The problem stems from the way in which media agencies are often evaluated and consequently incentivised. Sensibly, part of their incentives is usually connected to the sales performance of their client. Much of their assessments are, however, based on how well they buy media space/time compared with the rest of the media-buying market.
It is, of course, important to measure your agency’s ability to negotiate a good deal – and incentivise them to go out there and do the best they can. But if you overly incentivise how well
they buy advertising space in, for example, the Times or on ITV, you may be encouraging them
to recommend you buy ad space in the media they know they buy particularly well, rather than the media that will reach your target audience at
the lowest cost.
How well they negotiate deals is part of the answer, but it’s better to incentivise them to buy advertising in places that might also be cheaper and result in more sales for you.
In the same way that an hourly rate is not a reliable measure of value for an advertising agency’s creative services, nor is a price benchmark alone a clear indication of media value. TV channels and newspapers are themselves brands – much like
the brands they advertise – and brands demand
a premium by inspiring confidence in the
uncertain buyer.
Media buyers are far from uncertain and in most instances they are, in fact, sure enough to see beyond the media owner’s brand to their medium’s real value. Like a doctor purchasing own-label or generic drugs rather than the more expensive brands, media agencies’ TV buyers can buy the same value of coverage, frequency, build, position in break and so on, for significantly less money – if they are given the latitude. Let’s call this ‘smart buying’, and it’s all about trust.
Smart buying
So why isn’t everybody doing it? First, a client would have to be ready to redefine the value of their media agency’s service. Instead of using a simple empirical measure of leverage buying performance and their own brand sales, they would need to create a sophisticated blend of different standards, some more measurable than others, to create a new definition of value. But if such a definition included significant incentives for the media agency based on their client’s business performance and the agency’s ability to make savings, wouldn’t it be worth the trouble? One of the larger media agencies I spoke to about smart buying estimated their ability to make gross savings on media budgets of between eight and 15 per cent – which I think most advertisers would agree would be worth the trouble.
The second reason is down to relationship management. For a client and its media agency to exploit this opportunity, they would need to operate within a higher-trust relationship. Smart buying media plans can appear counter-intuitive to marketers who would have to trust that their objectives can be met with different media selections and weights. Such trusting relationships already exist between the few clients and agencies that currently exploit this opportunity, but switching to such a relationship would require careful management. Ultimately, the client holds the budget and so can only be helped to the extent they allow, and that boils down to the relationship.
The third and final reason is that, ostensibly, there’s nothing wrong with the current way of doing things. Current media selections and weights are largely delivering the attention of the right consumers and sales steadily increase as a result.
So if it ain’t broke, why fix it? Imagine an alternative history that demonstrated how smart buying could have been making your company a double-digit percentage saving from your media investment year after year – savings you can put back into your marketing budget or move straight to the bottom line with no detrimental effect on your sales.
So how can you realise this opportunity and what about the risks? There is a way forward that can mitigate any perceived risk and therefore the likely reluctance from marketing. A switch to smart buying doesn’t have to be an either/or scenario. By introducing a gradual transition between buying strategies, with the application of new agency incentive deals and a robust relationship management programme, your marketing stakeholders can move from one way of buying media to another smoothly.
Small fortune
A frequently posed argument against the smart buying approach is that your media agency will have to pay more for time/space if they are lowering their volume commitment to their currently preferred media owners.
So can any agency plan smart and buy smart for a willing client? The media powerhouses don’t have a problem. They have sufficient buying power across their large client portfolios to buy lower volumes from premium channels at very competitive rates for the clients for whom they buy smart. The smaller agencies may have to pay a little more,
but across the mix they are still likely to make a significant overall saving. So if the smaller
agency was evaluated purely on their buying performance against the market they may have
been deemed to underperform, but against your business objectives they could have been saving you a small fortune.
☛ David Meikle is a founding partner of Red Salt. Email: info@redsalt.co.uk.
