This post is by Darren Woolley, Founder of TrinityP3. With his background as analytical scientist and creative problem solver, Darren brings unique insights and learnings to the marketing process. He is considered a global thought leader on agency remuneration, search and selection and relationship optimisation.
With the rise of trading desks and programmatic buying for digital media trading there has been a corresponding rise in concern from advertisers regarding the level of transparency in their dealings with their media agency.
Certainly the Mediacom revelations of last year and the confession of the ex-CEO of Mediacom in the US fuelled this concern. Even though media rating company RECMA announced Mediacom as the highest rated media agency network in the world.
But beyond concern, what are advertisers doing to bring greater levels of transparency and accountability back into their media agency relationships? What can advertisers and their procurement teams do to ensure they are getting not just the best media value but also the best performance from their media investment?
The mediapalooza effect
Perhaps the most obvious, but possibly the least effective response to the current situation is to go to market and pitch the account to the marketplace. We have seen this with the mediapalooza of more than $26 billion in global media accounts out to pitch. It is like the proverbial feeding frenzy as the media agencies and their networks try to defend the business they have and try to win as much new business as they can.
The problem with the pitch, which we have seen over recent years, is that it makes it difficult to select a new agency on anything more than the chemistry and the cost, with very little differentiation on culture and capabilities. In fact this is why the Calibr8or System was developed to help media agencies measure their capabilities against the competitive set, but equally important, it allows marketers to assess media agencies on their capabilities in a pragmatic and objective way.
The sad fact is that it is likely most of the media accounts currently under review will not achieve a greater level of accountability and transparency in any practical sense. But instead media agencies will promise unsustainable fees and unachievable media rates, the very catalyst of the current situation.
Contracts and compliance
Of course there is significant work being undertaken around the globe, including ISBA and the IPA developing new transparent focused contracts and John Billetts, the father of media auditing, recommending that advertisers need to contract both their media agency and the holding company.
Contract compliance, especially financial compliance is at the forefront with Ebiquity providing a global service in financial compliance auditing, and media buying benchmarking, alongside their competitors Accenture and several others. Yet the question on how effective this is in driving media value and performance remains.
What we have noticed is the number of standard ‘services agreements’ or ‘agency drafted’ agreements in place with a heavy focus on terms, conditions, SLAs and KPIs that are not relevant to the media trading process. They simply act to bog down the agreement to the point it becomes almost irrelevant to the performance of the services it covers.
Performance and incentives
Interestingly, the focus in the past has been about contract compliance and cost benchmarking. The performance nature of the digital media means that increasingly advertisers are looking to find ways to measure and optimise the performance of their media investment.
In the US especially this has given rise to Incentive Based Compensation and even WPP’s Sir Martin Sorrell sees opportunities to embrace more incentive based remuneration. The primary difference between performance based (PBR) and incentive based compensation (IBC) is the focus on results like the payment by results model (PBR). Instead of paying the agency for simply doing their job well and developing a good relationship, the focus is on delivering to the objectives, both marketing and business.
The fact is that digital media and the associated data allows you to track and measure the online behaviours of the audience and by using an attribution model, be able to allocate or attribute the results to the various media channels. You can then pay on the result and calculate the return on media investment (ROMI).
Process transparency and accountability
When advertisers ask us to assess their media performance and the performance of their agency they are usually thinking about media audits (or more correctly media buying benchmarking). The issue is that media buying benchmarking is simply a measure of how cheap the media was bought for. It does not give any indication as to the relative performance of that media and often does not provide any transparency as to the buying transaction.
Instead we are offering our advertiser clients the opportunity to have their process and the agency’s assessed against best practice at each step for transparency, value creation and performance measurement. Rather than a backward looking measure of media buying rates, it provides a diagnostic and a recommendation on how to achieve industry best practice to your media investment. We then provide an implementation plan including changes to process, contract changes and on-going checks to ensure the maximum benefit of the media investment is realised.
We have increasingly found that marketers who were often committed to the media audit are now wanting a more practical diagnostic approach to their media buying process which provides insights into transparency, media value and performance.
You can read more about our Media Transparency, Performance and Value Assessment here
With headlines around the world about media agency kick-backs and rebates it is no wonder advertisers are concerned about media transparency.
What used to seem fairly straight-forward has become more technical and less transparent with trading desks, programmatic buying and DSPs making the whole thing murkier.
Meanwhile, value banks and AVBs seem to contribute more to media agency revenue than the advertisers fees.
And the media audits advertisers relied upon to keep the agencies honest appear to be almost ineffective in bringing all of this to light.
So what can advertisers do to manage their media investment more effectively?
While robust contracts and financial compliance audits will ensure you are no worse off than you are now, they cannot drive increased media value and performance.
To achieve that the first thing to realise is that the media budget is a major investment for any organisation and that the best outcome is the delivery of maximum media value, rather than just lower cost.
Second, you need to ensure that your processes and those of your media agency are transparent to ensure maximum trust and accountability.
And finally, you need to ensure you are measuring and managing media performance and not simply cost.
TrinityP3 has been helping our clients better understand the media value chain and unlock ways to create, deliver and recover media value and performance within it.
We work with both advertisers and their agencies to define the best practice media investment processes and create a level of transparency and trust between the two parties.
We can provide you with the level of transparency and clarity you need to maximise your media performance.
Find out about TrinityP3’s Media Transparency, Performance and Value assessment service here