Advertisers can be taken for a media agency ride

Never until now have I been part of a review team for an advertiser on media agency terms of business.

 
I have now - for several advertisers.

I have found a bundle of nonsense where the media agencies have wrapped up deals that exploit the inexperience of the advertiser for their considerable advantage.

Try these three for size:

• First, is an agency, remunerated on the size of the discount delivered versus a norm. Sounds all right at first glance. But the norm is a variable feast that bears random relationship to an absolute price. So right now with media prices deflating, the agency is buying a higher discount and getting paid more, even though the client has had to cut the budget

• Second, is an advertiser deal (stuck in a time warp of media inflation) that has failed to keep up with the changing times? The agency performance related fee (PRF) is based on media price changes year over year. So right now, with that media deflation, the agency is raking in the dosh. And for what?

• Third, is an advertiser whose media prices have shown significant increase over and above any prevailing trends. Upon investigation the media agency is paid a flat planning fee and a media buying commission. The flat fee continues despite budget cuts and the buying fee has no PRF quotient. Looks like the agency is using this advertiser's budget to help finance better deals for other clients who remunerate the media agency more favorably.

The message for advertisers is clear. Do deals based on absolute not relative prices - just as you do for all other purchases - and ensure you pay the agency based on real like for like improvements measured against complete and not partial market norms.

Integrated marketing communications doesn't happen - even when you own the companies

I'd presented my paper to the 4th German Media Day in Munich - 10 days ago - ‘Trends in Worldwide Communications planning' (that's a subject for another place). So with the help of the most excellent translator Michael, I sat back to enjoy the rest of the session. I stumbled into the most awesome item of Media Madness, recounted by the frustrated Chairman of Grey Germany - Frank Dopheide.

Grey can't get their media agency to be creative about new media opportunities, even though it's a sister WPP company. He described the media agency as stuck in a time warp - "10% here and 20% there as before and we have a 5-year deal we can't break"

So Grey flaunted convention and set up their own in-house digital media agency. Except that it didn't work too well. On their small customer base they couldn't understand all possible technologies and couldn't match the stand alone digital agencies.

So in despair Grey have brokered a deal with Microsoft which are now operating as the Grey Germany digital agency

Makes you wonder why bother with a media agency especially when the guts of the client revenue has to be passed on to an outside party. Integrated seamless client service is a pipe dream, and it's not just in Germany. It's happening everywhere.

If WPP are worried about downturns in revenue it might be best to stop this madness and ensure their existing cost base delivers better services.

Media clout & cheap media buys don't fit. Even the large media buyers agree

Years of UK media evaluation for the widest possible range of advertisers, proved that large media budgets and cheap media buys don't go together.

We reached the same conclusion across Europe

We went to the US and found exactly the same.

Yet the media buyers claimed otherwise and just got bigger and bigger. In just 5 years the largest six UK buying points gained market share from 69% in 2003 to 79% in 2007 and by 2008. 83%

But now we have the independent evidence and it's the large media buyers who agree.

The impartial source is The Office of Fair Trading (OFT) review of the ITV Contract Rights Renewal (CRR) Undertakings. Scan these verbatim highlights from sections 5.61 to 5.68 and you will have the material to spot the Media Madness mutterings of the large buyers

• 1. There are a number of reasons why buyers' increased size may be of limited use in restraining ITV's price increases

• 2. The extent to which ITV can penalise the media buyer increases as the media buyer gets larger

• 3. Increased size means switching a given portion of their spend away is harder

• 4. Media buyers may have limited incentive to exert their countervailing buying power

• 5. Media buyers have little incentive to react to price increase by ITV

• 6. It seems counter intuitive that smaller media buyers have more buyer than larger ones - this is contrary to the trend of consolidation

• 7. The incentive of media buyers to exercise that buyer power may be limited by the way they are remunerated

Next time your media buyer tells you it's all about scale refer him to his words in Section 5.61 to 5.68 and tell him he's in the Media Madness house. Scale benefits the buyer's cost base and hinders his ability to deliver for the advertiser

Getting great media value is about putting money at risk and having brilliant negotiators. Scale just inhibits the buyers' ability to move - and now they agree!

How to bankrupt your agency in one simple step

General Motors in the US, but probably soon in the UK also, is one of several major marketers that are asking advertising and media outlets to wait as long as 120 days to be reimbursed for production costs and media outlays, putting a painful burden on some shops.

Many firms and trade groups are vowing to resist these changes, saying the companies are essentially bullying their media and advertising vendors into making them no-interest loans. But it's hard to know what they could do, other than walk away from the marketers in question.

General Motors is in effect bankrupt . They rely for their survival on Government loans. I doubt whether it's possible to effect credit insurance at the required levels to cover one month of advertising expenditure let alone three months. And the government certainly won't act as media space cost underwriter.

So not only is the agency being asked to subsidize GM's cash flow, now GM want the media buyer to take the risk of GM defaulting, leaving the agency - acting as principals- to pay the media owners. On the small margins under which agencies operate this is a financial suicide note.

So the agency is being invited to save GM by going bankrupt itself. Media Madness is alive and well. I hope media agencies in their greed for additional income say to GM ‘we're going to remain profitable and keep our employees employed so take your business elsewhere'.

Beating the average - a suicide note

Among the few certainties in life is that ‘50% are worse than average'.

One major media agency group is trying to bust this self-evident truth. It's created either a ground breaking concept or a short self-inflicted suicide note.

The group has guaranteed - yes guaranteed across 2009, for one of its largest clients, a media buying performance that will deliver prices consistently cheaper than the group's own average.

Possible? Yes. Media Madness? Certainly

First, what advertiser could accept the buyer being the auditor?

Second, the agency's average price is meaningless. It could be good, bad or indifferent. The deal is not worth the paper.

Third and the best of all, the agency can only offer this guarantee for 50% of its clients. If you were the client how would you feel about being in the bottom half?

The client may have been duped. Once the news leaks out that this deal has been done, every one of their clients should demand the same. And why not? Then the media agency group will be in serious trouble with its 2009 deals. They can only satisfy half their clients. And then we shall watch the new business pitches. There will be lots about

You couldn't make it up. Media Madness is alive and well

The way newspaper space is bought & sold has nothing to do with value

You may imagine that trading newspaper ad space, does, in some meaningful way, relate the price of the goods to the audience delivered. You would be wrong.

The trading process adopted by sellers & buyers and supported by auditors & advertiser procurement management, positively rewards papers offering poor value and penalises those offering better value.

For some bizarre reason, the practice has grown up and become enshrined of trading newspaper space on the cost of a single column centimetre of space. Media Madness is at work big time. The process ignores both the size and nature of the audience to that space. It's like buying TV by the second and outdoor by the square metre.

The process ensures that papers with the fastest reducing circulation benefit most. They can offer bigger discounts whilst selling at a cost per circulation/readership premium.

In every media transaction with which I have been involved, the larger, most desirable audiences have commanded a premium. Not in newspapers.

Here's just two examples - there are many more

First, among popular & mid market dailies, the massive audience provided by the Sun is bought at a cheaper cost per reader than charged for the readers of the smaller & fast declining Express, Mirror & Star.

Second, the same occurs on Sundays where the many News of the World readers can be bought more cheaply than the fewer readers of the Express, People, Mirror & Star.

Let's drop now the madness cost per SCC metric that damages advertiser value. We should get focussed on trading cost per newspaper buyers & readers. There will be siren voices. But only from the - you know who you are - poorest value papers. The result will demand no more spend from advertisers. The outcome will be a significant re-allocation of funds towards best value for money newspapers. And not before time.

Media Madness - whatever happened to impartial advice

If you thought the media owner commission system ensured the advertiser got the best, impartial advice, look at this horror story.

A well-known advertiser approached me recently, seeking a second opinion.

He wanted as continuous as possible presence across 2009 for his National consumable brand. The target audience was housewives with young families. His media budget was £1m. He already had a proven 30-second TV commercial.

I ran the numbers and reached the solution was the sustained use of Breakfast TV. This delivered the cheapest cost per audience, which accumulated over time to deliver high target audience coverage.

The advertiser liked that conclusion, but advised it was at variance with his media agency. They had recommended selected regional ITV airtime as their optimum solution. This route came some way down my ranking list

The advertiser played a hand on role when at his request, in his presence; I took the agency through my solution. They responded to the advertiser. ‘We couldn't buy that. Our agency arrangements make it impossible. We need to get all possible monies into ITV to meet the deals.'

‘We would prefer to resign the account rather than buy what you propose. We stand to lose more money from not making the deal than the fees you pay us.'

Impartial advice has got lost in trading practices where the agency's income takes precedence over advertisers' best interests.

This media madness resulted in new business for another media buyer.

#25 (the last in this series) of 25 Things we know about what we don't know about Marketing Effectiveness

Monday August 4th 2008

Marketers want to improve the effectiveness & ROI of their marketing investment. It's a strong working hypothesis and a good starting assumption. But the market place evidence from near & far proves that for a disturbingly large number, their preference is for the status quo of uncertainty, ignorance and "we like it the way it is"

Here's just two examples from my long collection of rejections of cost effectiveness improvement.

For the launch of our then MPMA media evaluation service in the US, all prior research proved worthwhile except in one key matter. That was the assumption that the majority of advertisers would welcome a service to help them reduce the money spent on media - whilst delivering the same reach/frequency etc, & therefore a much improved cost effectiveness. We were so wrong. The subsequent success of the endeavour came from the enterprise of the management team & entrepreneurial advertisers. This success came despite the push back from many advertisers who liked the long established relationships they enjoyed with the TV Networks & their media buyers and resented new ideas that might challenge their current unsubstantiated value claims.

At the launch of a major marketing sciences endeavour, we were plagued with marketing management who set unacceptable pre conditions on our appointment. My long time working colleague David Bridges recounts an early client skirmish. On the brink of proceeding the client commented "If there is any danger this work may prove the advertising is less effective than I currently claim, we wont' do it"

And these experiences are not confined to my inadequacies alone. For major wide scale confirmation turn to the 2008 Marketing Accountability study by the ANA (Association of National Advertisers) in the US. They found that "33% of marketing companies said there were no written goals of any kind to guide marketing strategy"

Amazingly, "less than half the companies have some kind of marketing accountability program in place"

40% said "ROI goals were formulated by the marketing department, using internal benchmarks" (Wow! Being judge and jury on your own case, rejecting external evidence, is a 100% guarantee of self - delusion marketing effectiveness)

The ANA report that "almost 100% of the marketing effectiveness metrics are backward looking" with "hardly any claiming to use forward-looking insights that guide business decisions" (Our #15 of 25 Things..  of July 21st highlighted exactly this need for built-in research operations)

Ending on a note of optimism the need for marketing cost effectiveness has never been greater. And an increased number of marketers are changing and accelerating their endeavors. And the techniques for measuring and effecting change are much more user friendly and suitable than ever before.

But if we want marketing to be recognized as a contributor to company success, a builder of shareholder value and deeper consumer satisfaction, we still have a long way to go.

I dreamed there is a fairy godmother waving her wand and granting me one wish. I closed my eyes, crossed my fingers and said "Marketers this is a serious business, please take it seriously".

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.

#24 of 25 Things we know about what we don't know about Marketing Effectiveness

Friday August 1st 2008

It's no more than self delusion to set as your marketing objective the aim of "increasing brand loyalty". Brand loyalty is little more than a function of the period of data collection and rarely a reflection of true consumer behaviour influenced by the marketer.

Dr Stephan Buck, that most learned and informed leader of what was then AGB, the premier operation in continuous consumer panel data, was the first researcher to identify the delusion of brand loyalty. Even the most frequently bought brands are bought infrequently. Washing powder is only bought 5 times a year, on average. So an improvement in brand loyalty would be achieved by getting consumers to buy your brand three times rather than twice per annum - hardly a recipe for strong brand development.

He went on to identify the repertoire of brand purchasing, highlighting the increasing role of supermarket brands. Taken as a whole, the number of consumers who were 100% loyal was infinitesimal.

So if the data collection period was (say) just three months it would be perfectly possible for everyone to be 100% brand loyal to one or another brand. But that would be a totally meaningless construct. If the data collection period was across a year, then almost 0% of consumers are brand loyal; an equally meaningless construct.

We have followed the lead he gave and developed this work further using a variety of data sets across many markets. The conclusion remains sound. The marketer is best served with strategies designed to maximise brand trial, all focused on attracting the maximum number of consumers to buy once, not through gimmicks and unfulfilled promises but with relevant attractive messages firmly rooted in the brand's benefit proposition.

The consumer knows more about the use of brands than does any marketer. So she/he will decide if they want to buy again and it is they who determine brand loyalty, not the marketer.

The best returns come from marketing techniques designed to maximise trial. Marketing programmes designed to develop brand loyalty are doomed to failure

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.

#23 of 25 Things we know about what we don't know about Marketing Effectiveness

Thursday July 31st 2008

Leaders in marketing effectiveness have recognized that the best way to make progress is to demote to the second tier the well established practice of using small panels of consumer behaviour - media exposure, brand purchase et all, and work intensively with the new premier league of consumer behaviour audits.

Interesting that the biggest, current marketing effectiveness news is about the probable acquisition of TNS by either GFK or WPP. It should be about getting control of Dunn Humby, the majority Tesco owned company who with their creation and development of Tesco Club Card (and now live with Kroger in the US) are the company which knows more about consumer behaviour in store than TNS & GFK & WPP combined

Interesting too that the biggest media effectiveness challenge, in both UK & USA, is about BARB & Nielsen's measurement of in home and out of home TV audiences, when in reality Rupert Murdoch and his Sky digital TV & on line services know more about the reality of channel switching and viewing behaviour than any subscriber to  Nielsen, BARB and the rest of the media panels

The new reality is transaction based consumer studies and audits of millions of viewing behaviours and the relationship of the two. Its hard behaviour we are monitoring not soft samples of high variability.

We started years ago with face to face interviews. We moved then to telephone interviewing. We then moved to internet panels. The latest rapid research comes from live mobile communication. Now in 2008 we experience behaviour auditing for fast action, fast results, fast reaction.

In an earlier "July 21st #15 of 25 Things..." we noted how embedded rather than tacked on research was bringing new opportunities to measure marketing effectiveness. To that we now add the use of behaviour auditing, bringing further new insights that break conventional moulds of marketing effectiveness operations.

If you are not yet on board, there's still time. But don't delay. The ship is sailing 

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.

#22 of 25 Things we know about what we don't know about Marketing Effectiveness

Wednesday July 30th 2008

Not long ago the direct marketers, the direct marketing agencies and the direct marketing trade associations could claim they were the true faith of marketing effectiveness. Their claim to divine holiness was that they were the purest form of marketing effectiveness. Not any more folks.

They claimed they alone could relate input to output and hence "owned"  he holy grail of marketing effectiveness. Now, the combination of technology and the internet has made us all direct marketers.

It's now clear to all except those in marketing denial. Coupon clipping, direct mail responses, letter writing, phone calls & click through, no longer "own" the marketing response metrics.

The evidence points clearly to the fact that digital technology and internet research now make every advertising expression "measurable", from traditional TV and newspapers via mobile communications, through to embedded messages in game play and third world applications and lots more.

As with all developments and evolutions there are the doubters who believe these new approaches are but flash in the pan notions and others who appreciate the possibilities but reject the current methods. Both are out of touch with the new reality

The initial and fast growing mountain of evidence now available through any business and agency that embraces digital technology proves conclusively that there are real winners emerging among those who embrace marketing measurement as a permanent feature of the marketing landscape.

The strongest evidence of this sea change is the small but increasing number of procurement and financial management now embracing marketing ROI.

I am neither the best equipped, nor is this column best placed to identify the many examples. But for those who wish to know more and see the evidence, drop me a note and I will happily make the connections with the new direct marketing effectiveness experts. 

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.

#21 of 25 Things we know about what we don't know about Marketing Effectiveness

Tuesday July 29th 2008

Sustaining your marketing visibility over time with limited intensity is more cost effective than shorter, more intensive bursts of activity.

One of the longest standing marketing conundrums remains unanswered in the market place; that is if you judge uncertainty by the volume of column centimeters written in articles and blogs and by the wide range of different campaign plans tackling similar situations. "Which works best? Bursts or continuous marketing activity?"

Sorry to disappoint the punters. Sad to have to try and squash debate. I hope I won't offend any who have built marketing careers backing both horses. But the truth is out

Legions of empirical evidence from across Continents, Campaigns and Categories proves that building a marketing presence over time works best.

We noted last week (#18 of Things.. July 24th) the necessity to deliver high target audience reach. So once you've done that stop and don't waste money doing more. Spread the money out over time and sustain visibility

Bursts just incorporate massive diminishing returns. Of course all media owners love bursts, they get the money faster.  Many agencies love bursts; they get their commissions in bulk. Marketing directors love heavy weight campaigns especially early in the financial years before the CFO can re-gather the unspent funds. But don't fall for these blandishments.

For anyone truly disposed to optimising marketing effectiveness resist these siren voices and just take  a calm approach to sustaining visibility. There are two groups who just love sustained marketing visibility; your customers and your shareholders. And their judgment really counts in cash.

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.

#20 of 25 Things we know about what we don't know about Marketing Effetiveness

Monday July 28th 2008

Consumer promotions, trade deals, retailer support, direct mail & media advertising are internal competitors for marketing funds. Instead of complementing each other they often act in counter productive ways. And many marketers like it that way and encourage dissonance not harmony

Many companies organise, separate and distance their several marketing activities. The result is a series of fractured communication messages, creating uncertainty among prospects and delivering marketing ineffectiveness.

Try these for size. All are current in the UK,are alive and active. You may recognise these & other from your own experiences

1. A major financial institution structures in its own marketing ineffectiveness. Its on the ground High Street branch marketing is isolated from its direct marketing business targeting existing customers, which in turn is at arm's length from any brand advertising.
2. A major retailer organises its branches not only as a separate profit centre but as a stand alone Limited Liability Company, quite distinct from its central media function, which is outside the P&L of any operating business.
3. A leading marketing director discourages any parallel investigation of the marketing effectiveness of his advertising & sales promotions for fears that the sales promotions might be seen to work best and he loses his advertising budget
4. Another marketing director has responsibility for advertising but no responsibility for trade deals which are the responsibility of a separate sales director who does not report to the marketing director.

With some management remunerated on a commercial set of criteria such as volume, sales & short term metrics & with others remunerated on marketing metrics such as brand standing, image & value, it comes as no surprise that these organisations struggle to demonstrate cost effectiveness from their marketing communications.

It's understandable for critics to be concerned about our limited ability to capture interpret and understand all about marketing effectiveness. But spare a thought for the humble analysts trying to make sense of a set of disordered and incoherent input and outputs brought about more by the client who is paying the bill than by the operation charging the fees.

To assess from where the most cost effective marketing comes, identify the organisations that integrate and manage commercial communications under holistic management. They are the clients really worth working for.

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.

#19 of 25 Things we know about what we don't know about Marketing Effectiveness

Friday July 25th 2008

Television is the most effective marketing communications medium. That's what the TV networks claim. That's what the ad. agencies claim.  Proven TV case histories abound. It's what the econometric models "prove". So it must be true. Or is it?

It may not be true! We've never even given other media a chance or even a look in.

It's something that's bugged me for years. For sure, television is a very powerful and persuasive medium. But why is it that the volume of evidence is so swamping & favouring the domination of television as the brand leader effective medium?

It took me years to work it out and I have only recently proved the empirical reason. It's not that television IS the most effective medium. What happens is that whenever we plan TV campaigns we do three things that introduce a massive & unique bias in favour of TV.

1. First, we deploy far more absolute amounts of cash behind TV than we do for any other medium.
2. Second, we then compound the matter by planning that money in far more intensive slugs of cash per advertising week.
3. Third, in multi-media campaigns we ALWAYS start with TV. We never see other media precede TV

Econometric models & other multiple-regression techniques, always start with the first and largest effect. So if we plan TV that way it's inevitable that TV will be proven to work best. If you index the average TV campaign weight at 100, the average newspaper/magazine campaign is planned at 35 - a third of the weight. If the intensity of the average TV campaign is set at 100 units per week, the average radio campaign is planned at 25 - a quarter of the weight per week. I have as yet insufficient internet campaign evidence to be certain, but the initial analysis suggests that if the average TV campaign eats up $100 per week, the average internet campaign spend is only $15 per week.

With this massive built in bonus in favour of TV it's no surprise that TV "works best". No other medium stands a chance of proving its effectiveness.

The usual response to considering alternatives to TV is "but TV works, so why drop it for some experiment in marketing effectiveness?" That's an understandable reaction. But if we donate to the TV networks such a head start in extra money, it comes at no surprise that TV effects dominate.

The evidence suggests that if marketers start planning non-TV with the same weight, intensity, scale & cash as has become standard TV practice, you will be amazed how cost effective alternative marketing communication channels can be.

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.

#18 of 25 Things we know about what we don't know about Marketing Effectiveness

Thursday July 24th 2008

Campaigns that are seen by more prospects, always deliver more rewards. It sounds so obvious, yet  many campaigns overlook or just ignore the simple truths.

Despite all the advances in marketing sciences and the use of new digital research technology designed to track & understand better our target audience consumers, we have to face up. The prospective consumer knows more about themselves than we can ever appreciate.

We never quite know who is in the market for our brand. We never quite know when the prospects are in the market. Our prospects are better self selectors than advertisers.

The optimum solution is therefore to optimise the reach of the campaign, ensuring that as many as possible know of the marketing message. (Attempts to isolate the limited number of hot prospects and then drench them with marketing communication, are doomed to failure)

This high reach conclusion brings with it some challenges for effective marketing. And its harder to deliver too

• Diminishing returns can set in to deliver high reach
• High reach demands a mix of integrated marketing activities
• Multi-media rather than sole media advertising
• Premium prices for media that deliver scarcity and unique audiences
• And others

The marketer who chases the cheapest communication options & their procurement colleagues who benchmark marketing communication as a commodity, may impress some with their apparent cost efficient approach. But unless they also embrace & embed high reach as a marketing effectiveness metric,  the consumer response will prove it's a cost ineffective solution

(Readers who would wish to know more about high reach strategies are encouraged to seek out the "Recency Planning" work of my one time colleague in billetts America, Erwin Ephron & also the work of Prof. John Philip Jones of Syracuse University NY & his work on "STAS" (Short Term Advertising Strength). The lectures, articles & books from both have informed and inspired me.)

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.