Making ad budgets work harder is not about lowest price
Roger Parry, the chairman of Media Square, says that to get the industry back to “harmonious and mutually” beneficial trading something needs to change.
Having listened to the initial debate it has shown that all parts of the industry now need to co-operate to come up with new ways to assess what is meant by “value” in terms of media. The challenge can be expressed in a single question:
How can we make an advertising budget work more effectively by doing more than just trying to negotiate the lowest possible price for media space and time?
Underlying this are three more questions:
1. How can advertisers reward agencies for innovation and insight rather than just price negotiation skills?
2. How can agency pitches be run so that the winners are those who provide the best overall client solutions rather than promise lowest prices?
3. How can media owners be rewarded for the impact and brand communication delivered rather than just on basic audience numbers?
If the industry cannot find good answers the already fractured relationships are likely to get more damaged.
The media industry depends on the successful interaction between three groups: advertisers, agencies and media owners. All three have a role to play.
Increasing demands by advertisers to obtain rock bottom media prices have led agencies to be ever more aggressive in negotiation. And in some cases, it is alleged, for agencies to seek to win pitch contests by promising to deliver prices which media owners are not prepared to offer.
Agency margins are under pressure. Media owners feel they cannot get the income they deserve to allow them to invest in their product. Advertisers complain the media industry is becoming opaque and deal driven. Auditors are said to be creating tensions based on comparing price deals rather than helping clients monitor overall media performance
The Big Media Debate made it clear there are some serious problems which centre on what people really mean by media “value.” All participants seem to agree that it must mean more than just “price.” In an ideal world value would be a combination of price and quality. But price is easy to measure and quality is far more subjective.
The investment in creating brands through advertising started in the mid 1800s. Before that the owners of media – only print back then – relied on cover prices for income. Agencies emerged to manage the interface between the numerous advertisers and the multiple media outlets. Right from the start agencies charged commission to the media, on whose behalf they sold space, even though most of their own costs were providing creative services to advertisers.
For nearly 150 years the three way relationship has prospered to the benefit of all players. Brands have built huge value, a vibrant media sector has provided entertainment and information and agencies have emerged as the home of creative ideas.
But now the status quo is challenged. To get the industry back to harmonious and mutually beneficial trading something has to change.