Challenging some of the strategic notions of media agency structures and services

Recently the trade press in Australia had a headline that screamed:

“Woolley questions RACQ agency consolidation”

The story linked my opinion on agency consolidation, which is that it is not right for everyone, with the fact that the RACQ in Queensland was undertaking a pitch to do just that – consolidate their creative agencies.

Across the region and increasingly across the globe we are discussing with clients the ideal agency roster. Is it better to have a single global agency network across multiple markets? Or different best of breed agencies in different markets?

There are very different thoughts depending on if you are talking about:

  1. Content agencies like creative and digital agencies
  2. Channel agencies like media planning and buying agencies.

You see if it is content, economies of scale can be delivered with having a single network, where one strategy or idea is developed and then implemented across the network, with a focus on localising the implementation within the globally agreed framework for the brand.

But what about the channel agencies handling media planning and buying?

Last year the WFA surveyed their members on media agency remuneration and one of the interesting results is that 4 out of 5 of the advertisers said that they appointed media agencies on a national or market basis, while only 1 out of 5 appointed global media agency networks. This is steady from the pervious survey in 2008.

Lets look at the reasons why more global advertisers would be choosing media agencies on local market basis than going for a global roster.

The obvious reasons are:

  1. Agencies of all types can vary on a market by market basis, but media agencies have very market specific metrics especially around buying that can quickly highlight the inconsistencies in performance of an agency network across different markets.
  2. Even global digital media owners like Google, Facebook and the like have market or regional sales teams to negotiate deals on a market basis rather than specific global deals.
  3. In fact, very few media proprietors are global. The political nature of most paid media is it is very much local, or at the most regional, as countries look to exert some level of control over the media in their territory.
  4. There is little benefit in appointing a global agency using the argument for economies of scale, as the agency in each market needs to resource to deliver the services in that market, and with the agency fee typically 2% – 3% of media billings for traditional media this is a relatively small opportunity to reduce the cost of business.

The idea of achieving efficiencies through a global media network is not one practiced by the majority of global advertisers. Consolidation with a single network does provide convenience in that there is one go to person for when the relationship is under-performing. But the convenience comes at what cost?

  1. Often the network of agencies will have patchy or inconsistent quality across that network, leaving the advertiser hoping the poor performers are in the less significant markets.
  2. The few global media opportunities can be negotiated by the media agency in the market where the head office of the global media proprietor is based on behalf of all markets.
  3. Rarely are the economies of scale achieved negotiating an agency network deal. In our experience the network will need a layer of management to co-ordinate the agency network internally leading to additional cost.
  4. When savings are delivered they are often through an impost on the quality of the resources applied to the business on a market by market basis, exactly where you want quality people negotiating savings on a campaign basis.

What is your ideal approach? Have you successfully delivered efficiencies and savings through media agency consolidation? Or did it come at the cost of effectiveness? Let me know what you have found by leaving a comment here.

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About Darren Woolley

Darren is considered a thought leader on all aspects of marketing management. A Problem Solver, Negotiator, Founder & Global CEO of TrinityP3 - Marketing Management Consultants, founding member of the Marketing FIRST Forum and Author. He is also a Past-Chair of the Australian Marketing Institute, Ex-Medical Scientist and Ex-Creative Director. And in his spare time he sleeps. Darren's Bio Here Email: darren@trinityp3.com
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