Tuesday July 15th 2008

Media buying is a budget allocation business almost exclusively about optimising media cost efficiency and has little, if anything, to do with optimising marketing cost effectiveness.

There's a business of high volume & cost of employment, deploying significant amounts of money, using considerable business and operational expertise, located in the offices of media owners, media agencies and among advertisers which has little influence on the amount of money spent on advertising and precious little to do with marketing effectiveness.

The practice of media buying takes the sum of money the advertiser elects to spend and optimises the size and type of the audiences delivered for that money.  That's it.

In addition to reviewing all the previous studies and assessing the published literature, such as the Peacock Report and IBA work, we have completed three major studies to examine the relationship between advertising spend and media prices and media value: - 

• A major study for the UK advertisers' trade body, ISBA
• A major study for the largest commercial UK broadcaster ITV
• A consultancy service, alongside Prof Paddy Barwise of the London Business School, for Ofcom

The evidence shows that when media value efficiency (cost per audience delivered) improves, advertisers can deliver their rating targets by spending less. When media prices rise, advertisers spend more to reach the same audience. Great value = spend less. Poor value = spend more. It's the opposite of what you might expect.

The problem is compounded by the lack of absolute marketing effectiveness metrics and their substitution by cost per audience relative media efficiency metrics.

Media buying efficiency models can't work effectively across media types because the measures of audience contact - viewing, reading etc are totally incompatible. So we are left with buying practices unique to each medium, compounded by the activities of the media auditors, where the evaluation is restricted to benchmarking relative cost efficiency versus competitive sets and paying no attention to the absolute cost effectiveness of buying the audiences.

We currently read a lot of the falling revenue of all media in the face of the current economic difficulties. Media audiences remain established and large. The cost of reaching those audiences hasn't been cheaper for many years. But the marketer, looking to suppliers to help and guide through the crying out need for cost effectiveness, is stuck with out of date metrics that simply allocate the money and then justify the spend by comparing to others the cost per audience performance delivered, without reference to optimising marketing effectiveness

The first media buying business that can deliver what advertisers' need will have a real competitive advantage

For a range of commentary on advertising, media & marketing issues, John Billett's personal "Blogit with Billett" is at www.johnbillett.com (& click on "Blog" on the Home Page) or go direct to http://blog.johnbillett.com.