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Managing Marketing: The changing role and challenges facing media agencies

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Managing Marketing is a podcast hosted by TrinityP3 Founder and Global CEO, Darren Woolley. Each podcast is a conversation with a thought-leader, professional or practitioner of marketing and communications on the issues, insights and opportunities in the marketing management category. Ideal for marketers, advertisers, media and commercial communications professionals.

David Angell is the General Manager and Head of Media at TrinityP3 and here he chats with Darren on the increasingly complex role played by media agencies and the challenges they face in meeting the needs and demands of their advertiser clients. As intermediaries between advertisers and the media providers they are increasingly challenged with not just managing this complex relationship but also contributing to overall marketing performance too.

You can listen to the podcast here:

Follow Managing Marketing on Soundcloud or iTunes

Transcription:

Darren:

Welcome to Managing Marketing and today I’m sitting in a car in one of the many famous lanes of Melbourne, having a chat with David Angell, who is General Manager of TrinityP3 and head of Media. Welcome, David.

David:

Thank you, nice to be here.

Darren:

I should say, ‘welcome Darren’ because we’re in your car. You’re hosting me.

David:

But technically your city, my city too.

Darren:

Your town, your paper.

David:

I’m hosting you in this lovely car in this lovely avenue so it’s nice.

Darren:

It’s been a hot topic. You joined TrinityP3 about three years ago.

David:

Just over three years.

Media from a advertiser and agency perspective

Darren:

But before that you’ve had quite an extensive career in media from both an advertiser’s perspective and an agency’s perspective. I wanted to start off getting your reflections on that; the different perspectives. We’ve had a lot of discussions about the relationships between agencies and advertisers.

What do you see as the biggest difference between sitting on one side of the table with the budget and, on the other side of the table, talking to your client?

David:

That’s an interesting question and I would add that my experience with Trinity P3 has also been a very valuable client-side experience because I’m effectively sitting with those clients when we are talking to agencies.

I think the challenge with media agencies has been to view the world in quite a myopic way. Sometimes that’s because they’re driven by the client to think like that and sometimes it’s because they haven’t got the skill sets to think more broadly.

But the difference is where they are thinking of media as being a major component of marketing, the marketer is thinking of media being one of many, many channels that he or she has to navigate.

And the agencies that are winning at the moment are the ones that are able to translate what is effectively media strategy into a broader commercial marketing and business approach. And that’s something that continues to challenge agencies even today.

Darren:

That’s a great observation. One of the things you see is that so many agencies; media, digital, they almost go down the rabbit warren of their own media specialty and forget that they’re communicating with people that have got hundreds of moving parts.

David:

If the best agency in the world is the one that delivers truly agnostic transparency and recommendations to clients, there is a disconnect between having that approach and being a specialist agency.

Because, clearly, if you’re a digital agency you think about digital 100% of the time that is not always in the client’s best interest, whether you’re doing it for what you think are the right reasons or not.

That’s been apparent for many years as digital has arisen as a specialist component of the agency landscape. But what we’re finding more and more is that those specialist agencies are now A) trying to branch out in terms of their capability, which sometimes works and sometimes causes confusion but B) they’re trying to find people, certainly senior people and leaders who do not come from a digital background or a media background.

They’re looking for a diversity of commercial experience that enables their leaders to articulate these kinds of things to a client without being too narrow-minded.

Darren:

David, such a great term; commercial perspective because I think marketers are under so much pressure to deliver commercial results, not just marketing results. And if agencies can get on-board with actually thinking in the context and framing of commercial performance and support their clients in doing that, that’s a complete game-changer.

David:

It is, and it really attaches a significant value to the output of an agency that goes way beyond, are you buying your media cheaply and are you buying lots and lots of inventory?

And I think that agencies and holding companies and networks are currently trying to find ways to really fit/ pivot as best they can to this new reality. Of course, the role of data and tech plays a major role in that.

The pressure that’s on marketers, a lot of that is to do with the fact that the C-Suite has now woken up to the fact that all this data is sitting there. There’s customer data and marketers are asked to become more customer-centric and become more accountable as a result. And they need their agencies more than ever to help them navigate that stuff.

Darren:

Yet, as you said before, agencies (especially media agencies) have spent years and years becoming experts in media and now it’s almost like that’s just a table stake: you don’t get to sit at this table unless you’re already an expert in media.

But we want you to go to the next step, which is always reframe it in our commercial reality.

David:

Yeah, and it’s getting the balance right from the client’s point of view—it’s really important. Media is just a table stake but it’s a very important one, obviously, that can’t be overlooked. So, there’s a balance in that.

But from the agency’s perspective, how they get paid for this kind of work, how they get remunerated, to come to a remuneration structure that is transparent and sustainable enough is something that I spend a lot of time talking to clients about because this kind of skill-set does not come for free.

And agencies have been traditionally quite challenged in monetising these kinds of services and that’s why, in some areas, they’re under developed.

The dangers of focusing on savings when selecting a media agency

Darren:

You’ve touched on tenders, pitches, RFPs, whatever you want to call it. It’s interesting because we’re talking about marketers wanting these extra dimensions from their agencies and yet so many times when you hear about a client going to market for a media agency, the selection criteria is all about the media. You know; how well do you buy, strategise?

It’s all about the minutiae of getting that important table stake raised. But it doesn’t often go beyond that in the traditional RFP does it?

David:

It doesn’t. Some of that is to do with marketers either being in a comfort zone or not really thinking through enough what they could drive from an agency in terms of value, what that value equation is? The influence of procurement can sometimes play a part in that and a lot of the work that we do in Trinity P3 is trying to align internally those two partners, components so that they are pulling in the same direction.

Darren:

My observation is that sometimes marketers and procurement are almost like separate stages in the process. The marketers will be really deeply involved in the first part, which is about interrogating and selecting the shortlist and then it’s almost handed to procurement as a secondary phase to do the remuneration.

Yet from an agency point of view the two parts don’t exist separately. It’s not just you want all these services, how are we going to get paid for them? Yet the actual selection process is first of all select the agency we like because they’ve got X, Y, and Z and now I’m going to hand it to my friendly procurement person here to take the gloves off and give you the examination.

David:

We always advocate the involvement of procurement as much as possible up front in the process and they are true stakeholders as opposed to just handling that area of things. We find that one of the trickiest components of any pitch process tends to be asking the marketing and procurement clients to develop a scope of services or work that truly reflects what they actually want.

We spend a lot of time upfront trying to define what it is that they want to achieve in this process; not just getting the right agency but getting the right agency to set them up or the future. That is often about much more than how cheaply can you buy media? In fact, it should always be about more than that.

So, bringing disparate parts of the business together that often have imbalances in power relationships and pulling different agendas is where we can add some value.

Darren:

You’re right, in that procurement (depending on the procurement team) often feel that their role is all about the financials. And yet the two are inextricably linked. The financials are linked to what is it you actually want the agency to deliver? And what’s the value part the agency is actually going to be delivering to that relationship?

David:

Yes, and how do you measure that when you’re a procurement person? I do understand their challenges; how do you measure that in a traditional procurement environment? We’re talking about human IP, about adding value to a business which can’t always be quantified on a spreadsheet.

It can be quantified over time by outcomes or outputs, but it requires different thinking and a different model and certainly a different set of KPIs that go beyond the traditional.

Darren:

But are the agencies really helping this process at all because they often end up in the same old resource cost, overhead / profit multiple rather than thinking through what value looks like?

David:

I think the agencies know what value looks like; I just think they don’t know how to achieve that from a commercial point of view, from their own side of the fence. I think they also struggle for the talent that really can bring that to life.

When you work in a media agency you graduate up through the media ranks and I think a lot of agencies are now working much harder than they have been before on more holistic training. They’re either training their people or bringing different people into the mix.

So, I think the remuneration model is one thing; the way the agency engages in performance related incentive or KPI structure is another thing. And certainly, I think agencies could be more imaginative in that part of it. The third is making sure that the right people are actually engaged on the client’s business, whether it’s a pitch or an existing relationship.

The media agency challenge is recruiting developing and retaining talent

Darren:

Now, you touched on the work that agencies do, first of all recruiting talent and then developing that talent and trying to retain it. I think media agencies generally put a lot more effort into that than the creative and digital agencies, don’t they?

David:

They do. The evolution though has been away from the functional and towards the commercial. So, you’re not just training a media buyer to be a media buyer, you are training someone who can actually think beyond the media box and look at their client interests and that’s to so with future proofing the agency and the client relationship and that person as an individual.

I believe that media agencies, more so than many other sectors have to consider the now, the next, and the later really closely from a business perspective.

Darren:

The reason media agencies have put so much time and energy into it is that they got hit by the realisation that some of them were looking at 40 or 50% churn of their staff in 12 months.

That as fast as they could pour talent in one end it was walking out the other and that for the industry was a big issue.

I think the other issue for media agencies more so than other agency types is that it is so easy for media agencies to become commoditised when people superficially look at them as just doing media planning, strategy and buying.

Lots of other people do media planning, strategy and buying whereas creative agencies have the creative output; they can show their latest ad or Cannes award idea and digital agencies can show their latest phone app that they’ve developed or this whiz-bang website but much of the media agencies’ work is largely invisible or is not obviously impressive unless you do a lot of explanation.

David:

That’s why I refer to the now, the next, and the later. If you take now; media agencies are having to staff for a lot of people on the ground that do the invisible work, who do the TV buying, the work in BCC and other software systems and the day-to-day, ticking the boxes right?

But it’s exacerbated churn but if you look at Australia as an example; we’re still spending 60% of our money in traditional analogue TV. It’s still enormous in terms of the volume so they have to train for the now.

But they also have to think about the next, which is data automation, automation of these services. How are people going to progress their career if what they’re doing now is going to be automated?

And of course, they have to think about the latter, which is we’re going to have to become more consultative one way or the other. This landscape and the discipline of marketing and advertising is becoming more complex constantly.

To try and account for the now, the next, and the later and find the balance between investing ahead of the curve while at the same time retaining 60% of the money that flows through your business in traditional media is really tough. To be fair to the agencies that is a really tough ask.

You see that a lot of the agencies are investing ahead of the curve, data analytics is a great example. Programmatic trading is contentious but still a good example. And they’re having to invest not just in the basics of how to buy programmatic; they’re having to invest in protection against ad fraud.

They’re having to invest in terms of the way their agency is structured to cope with integrating programmatic as a channel as it expands into digital, TV, radio, outdoor—that’s now, next, later. And it requires some balance.

Darren:

You did mention the latter is also becoming more consultative and you’re seeing that a lot with the really smart agencies who are starting to build that. You’re seeing the consultants; the traditional management consultants come in and play in the advertising area.

Whether it’s around econometric modelling or performance or growth strategies or things like that you’re seeing a lot of the really smart media agencies building that capability as well.

David:

I think that’s a multi-faceted capability as well, right? The functional capability required to do these things is enormous but so is the capability of the person who is (to use a horrible cliché) T-shaped enough to be able to translate the functional into the commercial reality and into strategy that is in the client’s language and that the C-Suite can understand.

That is a skill set that is relatively rare still and has not always been trained for. So, they’re having to think about that a lot more. The role of business directors and those kinds of generalist roles is becoming way more complex. And they are spending a lot of time and investment now in training for that.

Darren:

Just on that point; thinking back to when media was part of creative agencies, that sort of business management was part of account management in creative agencies. When media agencies first spilt off they didn’t really take a lot of account management with them did they?

David:

No. I think there’s an important distinction between account management and account leadership. Media agencies have always had to manage things; they’ve had to manage day to day, they’ve had to manage which spots get put where, they’ve had to manage make goods. All of this stuff is basically account management.

They’ve had to have someone on the ground who picks up the phone and does that, right? That’s clearly very different from account and business leadership, which is more what we’re talking about now as agencies try to become more consultative.

In my career I’ve seen it done terribly where an agency says, ‘right, now we’re going to become consultants. We’re going to stick a badge on this 22-year old and go off and be a consultant’. I’ve seen that extreme to what I see now, which is the rise of positions like talent lead and the hive of external training companies and the in-swing of broader commercial talent.

If you just take one example very recently in the press: Dentsu X—they’ve just hired a new MD. She’s come from iSelect; she’s not a media or agency person, she’s an MD. She’s come from a senior role at iSelect; a completely different skill set.

But they are absolutely looking to pivot to something which is above the table stake.

Darren:

One of the other things that demonstrates the challenge media agencies have is awards.

David:

Yep, really contentious right now but let’s talk about it.

The issues and relevance of industry media awards

Darren:

But the industry loves awards. I saw a chart that says there are over 700 awards globally that an agency could enter. There are media awards in it but the thing I find about media awards (and this cracks me up) is that so many media awards, like Cannes media awards, are won by creative agencies and not by media agencies. And when you read into what wins it’s not really a media award (media is a component of it) but it was the creative that obviously got the eye of the judges.

David:

It’s the oldest problem in the world isn’t it? Who’s driving what? Is the creative or the media driving the result? I think media is very hard to pin down in the context of an award. It really depends on the exact scope and nature of that award.

One of the first things I learned on the client side is the disparity in care between what a client really sees and what the agency really sees in the value of an award. I’ve not yet met a client (in a pitch environment) who really places a huge amount of stock in which awards the agencies have won.

We do try and differentiate when we talk about awards. It’s not a level playing field; one award can be much more valuable than another. I call out the Effie’s as an example of a set of awards that you can probably attach a bit more depth to. It can probably be a bit more relatable to media. But there are a whole lot of others that are really just the creative agencies taking them with media trailing on behind.

Darren:

Some of the trade media put out these rankings of the agencies and they throw all the agencies in there together because increasingly the distinctions between creative, media, digital and all these are becoming harder and harder for the trade media to distinguish.

But you actually find it’s invariably creative agencies in those all-in awards that end up at the top because they just enter more awards.

David:

I think they enter more awards but more broadly this extends beyond the awards and extends into the way in which creative agencies have evolved. Creative agencies are way better at selling themselves. They are better at selling ideas, making ideas simple and effective and it’s why, historically, they’ve been able to gain a lot of cash aid at the table with the clients. They have that capability.

Media agencies, historically, in my personal opinion, try too hard to intellectualise the product. So, you end up with presentations and big decks that a lot of clients just don’t understand. And certainly, sitting on the client side, you can see the confusion where a strategic play from a media agency simply does not marry up to the actual execution.

And that’s really hard for a media agency to do and they’re not as good at doing it as creative agencies.

Darren:

It’s an interesting observation because it certainly plays out in awards.

David:

It certainly does, yeah.

Darren:

You’re not just working in media; you work across the full range of the business, you must see that in pitches as well?

David:

I include the last three years at Trinity P3 in the observations I’ve just made. To be fair to media agencies sometimes the things they’re being asked to do don’t exactly lend themselves to exciting salesmanship. It can be quite prosaic and with the recent and ongoing debate around transparency in an agency the client’s ears are well pricked up for what they would see as opaque salesmanship.

But generally speaking, creative agencies are way better.

Darren:

O.K. you’ve mentioned the T word.

David:

Yeah, have we got another three hours?

The impact of the downward price pressure on media value

Darren:

I feel like from my perspective and you weren’t with the company then (you joined in 2015) but from 2008 to 2012 I was seeing a constant downward pressure on what the media agencies were getting paid.

And I also saw that this was having a profound effect on the things that media agencies were doing to make ends meet. If the client was paying them less and not just paying them less but also demanding that they procure media for less and less (passing it down the chain to the media owners) then the system was breaking.

I started hearing things like the money being held by the agencies for things that were not being billed (media holds) so there were huge amounts, millions of dollars, sitting in agencies because of SOX compliance, certain agencies having trouble holding that cash in trust for the clients.

Then I heard about value banks and I’m going what are value banks.  Clearly this was driving a lot of behaviour. Do you think it’s as simple as that or is it much more complex? Was it the greed of the downward pressure on agencies that forced them, or has it been going on forever?

David:

I think it’s a mix of those two extremes. I think we would be naive to consider that agencies would not have exploited principal-based trading, media holds, rebates and AVBs (Agency Volume Bonification). I don’t think they would not have exploited them had they not been under pressure elsewhere.

There is no doubt that there has been downward pressure on media agencies with the base fees or that the advertising and procurement community is largely culpable for pressurising agencies into derivative KPIs that just simply race to the bottom line.

But agencies had been exploiting things for a long time, but they’ve just had to exploit it more than they would have done.

Darren:

Because when I have this conversation with marketers they go, ‘oh no, it’s not us. It’s clearly the agencies have been under pressure from the holding companies to deliver bigger returns and it’s not because we’ve been pushing down price.’

I go ‘well there’s a cause and effect here.’ If I had $100 million and I was asking someone to invest it for me, but I also want to reduce your cut of it I’m basically cutting my nose off to spite my face, aren’t I?

David:

There is definitely a two-way street. The other thing to remember is that media agencies are, of course, in business just like everyone else and when it comes to transparency and exploiting commercial gain no company in the world is 100% transparent anyway.

I say that to marketers—you don’t open your books to your agency or your customers in the same way that they wouldn’t to you. But having said that there is a fine line between profiting and profiteering.

And with the whole transparency debate, which has now extended way beyond just media agencies; it’s covered the entire supply chain. But I think that the biggest challenge I’ve experienced with that is not so much who’s caused what but more what is the level of awareness the clients have of the transparency on offer and how does that comply with the broader standards of their business or their sense of business ethics?

We do a lot of work just to let the client know how transparent things are and give them the option of either making it more transparent or keeping it as it is if they’re happy.

Darren:

Because it’s the other T word, which is trust and trust is a two-way street. I think it’s funny when marketers say, ‘oh, the agency’s breached my trust’. I also feel the agency has breached the trust because the client has breached the trust as well.

David:

I think that’s absolutely true. As a disclaimer here, I’ve come from 15 years of experience in media agencies, so I have an intricate understanding of what goes on in media agencies. The vast majority of people in media agencies are simply trying to do a good job and, of course, there’s pressure from holding companies. There’s always pressure from holding companies.

What I would say about trust is that yes, of course, it’s reciprocal. The agency that gets constantly stunned by the client who alters scope without altering contractual terms, the agency that is under 120 days plus payment terms from a client, well yes, trust is a two-way street. And you’re going to get a response in kind to a certain extent.

Darren:

But there are consequences of behaviour and this is why I go on about the golden rule: the man with the gold makes the rules. And so, I say the agency ends up playing the game the way the client sets the rules.

If the client wants to play the game that they pay less and less for their services then they have to also accept the consequences of that, which is that the agency is not going to value the relationship as much as they would if the client was paying them a fair, reasonable or just the same amount that they paid previously.

David:

One of the biggest disconnects (I’m talking from personal experience, going into clients with Trinity P3 and other roles) is the client who will complain about the agency not giving them an A Team.

Darren:

And they paid for the D Team.

David:

And they pay for the D team and with all due respect to the D Team who are not necessarily incompetent—they’re people in the now.

Darren:

Less experience.

David:

They’re the people in the now, doing the dot joining. It’s very hard to feel sympathy or empathy for a client who’s complaining about not having an A Team when they have not invested in either the relationship or the financials.

Certainly, whenever we work with agencies and clients with pitches or anything else we want the agreement and the terms to be mutually sustainable and beneficial.

Darren:

This downward pressure is not just on agencies because we’ve also seen it where clients are putting the agencies under pressure to put the media owners under pressure. To get the agency to guarantee a particular media buying position and wanting to hold them to it and then getting surprised when some ridiculously low position that was put forward is not deliverable.

David:

Firstly, when the position gets that low it becomes very hard to measure with all the variables anyway. But to get to your point, publishers are under huge pressure from everything from the day-to-day grind of an agency who constantly has to ask them for “new ideas” that grinds their time and they don’t get activated by a client who can’t make up his or her mind or hasn’t briefed it properly right through to the huge pressure on inventory caused by programmatic trading and an obsessive adherence to the lowest common denominator.

If agencies have got them baked into their contracts or have promised them (again there’s a two-way street), the publishers, particularly the longer tail publishers, are the ones who are really going to struggle.

Darren:

About three or four years ago I had a very senior national sales director from a media company and he wanted to meet with me because he said, ‘the agencies come to us all the time and say that Trinity P3 has told us we have to get this rate from you for us to be competitive in this pitch’.

And I said, ‘I have never ever heard that and we would never do that’. We’re not big on buying positions because they’re incredibly difficult to enforce and also because you’re treating media as the ultimate commodity that somehow, they can pick where the market is and do some magical deal.

David:

I can only speak from my own experience but certainly it’s not anything I would ever advocate. At the end of the day a commoditised position is not sustainable for either party and we’re talking about a value exchange here.

The agency has to gain value just as much as the marketer has to gain value. That value to an agency is not just monetary value. That value is in having the ability to do great work, that drives investment into people, that drives new people to the agency, and produces more great work, and wins new business.

Agencies; it’s not just about how much you’re paid, it’s about what you can do with what you’re paid and what that relationship allows you to produce. I’ve never worked in a media agency that’s just out to con people; far from it, they want to do great work.

Sometimes they’re not able to do that work and that is often the fault of the agency and or the client but ultimately trying to deliver a proper value exchange in a pitch or a contractual or remuneration agreement is something that’s really important and something that’s often overlooked.

So, commoditise the arrangement that pushes down on the publisher is not something that we would ever recommend, that’s for sure.

Darren:

Media is a significant part of a budget and if you’re only looking at how cheaply you can buy media you’re actually looking at how to spend it not invest it, aren’t you?

David:

Absolutely. I can buy 1,000 rotten apples or I can buy 3 apples that are really ripe. Again, it’s a value exchange. How do you equate value in that?

Darren:

This is a conversation I had with a procurement person and they said, ‘why do you keep saying that media is not a commodity? Media’s the biggest commodity there is.’ Where do you think this thinking comes from? Have you heard that?

David:

I have heard that. I think the thinking partly comes from procurement people being in a comfort zone of how they buy other things. They see unit cost and therefore they think commodity. The unit cost of buying a plastic bottle top for your drinks that you’re producing in your factory is the same as a unit cost of a TV spot.

But of course, it’s not as simple as that because there is an outcome attached.

Darren:

And there’s also a human being and that you’re wanting to plan media so that it delivers messages at the right place and time when the person is most receptive to changing their behaviour to deliver a sale.

David:

This is what I mean by an outcome. Even leaving aside paying the right person to do that as a service there is a massive difference between buying media at the lowest cost and buying media that is genuinely going to be effective and which is part of a much larger marketing ecosystem that is properly integrated. There’s a world of difference.

Darren:

Absolutely. Hey, David, this has been great to catch up in this laneway in Melbourne.

David:

Yep, thank you very much. I’ve enjoyed it.

Darren:

I’ve got a last question. Who do you think is the best media agency CEO in the marketplace at the moment?

There are more suppliers in the media planning and buying process today than ever. Selecting the right agencies and suppliers is essential. Learn how we can help here

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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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