The bigger the advertiser the bigger the media budget. But the fact is that size is a double edge sword when it comes to delivering media value. And in fact it is highly likely that the larger the client, the greater their operational complexity is reducing media efficacy. We explain why here in Media Minutes.
DARREN: Welcome to Media Minutes. I am Darren Woolley STEPHEN: And I am Stephen Wright DARREN: In the next few minutes we will share with you our view on advertiser complexity and how it is stealing value from your media investment. Stephen? STEPHEN: Yes, Darren. While major advertisers may use their large size and significant spend to negotiate reductions in agency fees and even media rates, we have found that often the inherent complexity within these organisations often reduces the value of their media investment. DARREN: Interesting observation, Stephen. How so? STEPHEN: Many of these larger advertiser organisations find themselves structured into siloes based on brands, services or segments. It is this structure, when it comes to media, that can often work against efficient and effective media investment. DARREN: You mean like a bank, as an example, will have a credit card team, a retail team a business team etc. STEPHEN: Exactly, Darren. DARREN: Or a house of brands will by managing a portfolio of brands with a similar audience across multiple brand teams. STEPHEN: Yes. DARREN: But how does this impact media effectiveness. STEPHEN: Well in a number of ways, Darren. But let’s start with the obvious. Usually, these products, services and categories will have similar audiences and yet from a programmatic media perspective, they could all be bidding against each other for that same audience. DARREN: I remember something similar happening with an insurance advertiser and their paid search. But isn’t the media agency responsible for managing that? STEPHEN: Yes, technically. But here is the second impact that size and complexity of client is having on agencies. That is by reducing the fee they pay the agency based on economies of scale, they are assuming that the services provided can be scaled. DARREN: Are you saying there are no economies of scale when it comes to media planning and buying, Stephen? STEPHEN: No. But you need to look at the complexity within the media agency services and structures required to service those large clients. DARREN: Can you give me and example, Stephen? STEPHEN: So, if I have a client spending $100 million on media and another spend five times that, $500 million, you could expect economies of scale if all things were scaled equally. DARREN: Right, got it. STEPHEN: But what if the larger advertiser was spending their $500 million across ten different business units or silos, each their either own marketing or media strategy, varying from $20 million in some business units up to $200 million in others. DARREN: That is complex. STEPHEN: And what if instead of perhaps five people briefing the media agency on $100 million, there is 50 people briefing in the $500 million, each with their own objectives, opinions and expectations of what is required? DARREN: True, Stephen. That would have a significant impact on the agency resources required to do the job properly. STEPHEN: Yet, the $500 million spending advertiser managed to screw the agency fees down by 20% or more based on their market clout, market competition and justified by ‘economies of scale”? DARREN: Good point, Stephen. After all, no one remembers the cost cutting that was done in negotiations, they just remember when the agency is perceived as underperforming. STEPHEN: Too true Darren, and that is how many large advertisers are letting their complexity rob their media budget of its inherent value. DARREN: Thank you Stephen. And for real value make sure you subscribe to Media Minutes. A weekly snack on all things media. Until then. I’m Darren Woolley, and he’s STEPHEN: Stephen Wright TOGETHER: And this is Media Minutes.