In the series of articles, I will be covering the stages of holistic media governance process to effectively manage and have full control over your media activities. As most processes, it starts with putting the right strategy in place.
What makes a good media delivery strategy?
When you advertise your business, you do this to achieve certain positive reactions from your consumers: let them know that you exist, inspire and excite them about your brand and what you stand for, induce positive emotions and associations that lead to long-lasting demand for your products or services. For this, you need to reach the right people at the right time and place through media that they pay attention to. It’s a standard obvious truth delivered during the pitches by nearly all media agencies. So, how you go about making it happen?
There is an obvious interplay between the quality of creative material and the results of the campaign: bad creative is hardly expected to produce great results no matter the execution. On the other hand, a great creative is just a pre-requisite for a good and effective media campaign: it still needs to be planned and executed right to deliver the desired results.
So, while good media execution is not the only factor deciding about the success or failure, given the weight of the media budgets within the overall marketing spend of the company and the importance of the delivery, it will have a significant impact on awareness, brand recognition, preference, which in turn influence sales and revenue of the business.
Make-or-buy
Advertisers need to make strategic decisions about how their brand message will be delivered to their consumers and which 3rd parties (if any) will facilitate it. The outcome needs to enable the best media planning capability and competitive pricing, while balancing flexibility with minimizing risk exposures and overdependence on the agencies. Setting the right media delivery strategy starts with the choice between doing it yourself (in-house model) or if the services will be outsourced to an external party.
The most common model involves one or many agencies that handle media planning and/or buying on behalf of the client, across one or many media types, possibly combined with creative design. The agencies specialize in media planning and execution and have the resources to do so (know-how, talent, tech) and are able to leverage scale of multiple clients in the dealings with media owners (with both pros and cons thereof for their clients, which I will cover later). For the clients, the agencies are the “off the shelf” solution and frequently the only available option, if their internal organization has no capacity / capabilities to do it themselves.
Bringing media in-house, however, has recently gained a lot of attention from the brands due to a number of reasons related to the shortcomings of the agency model.
In-housing
In-housing has certain benefits: it gives full control over planning and buying activities and removes any conflict of interest the agencies may have (more on that later)
The most common reasons for in-housing are:
- Media agency service quality issues:
Advertisers often feel that the agencies failed to bring in high quality team, tools and skillset to deliver the agreed scope of work. Recently, agencies have struggled to secure talent (Ad Age found the agencies have been delegating some of their work to media vendors and tech platforms to be able to cover the scope promised to the clients). The “A” team promised during the pitch is often replaced by an “F” team, with fewer FTE’s, lower seniority / skillset. Tools and solutions presented during pitches turn out to be an additional substantial cost or their utility is far more restricted than the promises made. Ways of working do not match the needs and /or resources and setup of the client, causing inefficiencies and frustration on both sides, resulting in deterioration of the client-agency relationship.
- Cost/ROI:
Clients often believe that they are able to deliver better overall value on their media activities than what is being provided by external parties. This would come through better alignment of and greater care for the brand objectives, direct dealings with media owners and their interest to deal with brands, better utilization of resources, etc.
- Transparency and objectivity:
While the agencies have the expertise and the leverage of all their clients’ budgets, the value they generate is often unevenly distributed between them and their clients (and also between the clients – some get less than they are entitled to). The agencies’ interests are not always aligned with these of the clients, which may lead to sub-optimal solutions and media value loss to the brands. Recent reports (such as ANA Media Transparency report) have unveiled numerous non-transparent and questionable media management practices designed to extract and retain value that should otherwise be returned to clients. Moreover, the clients want to ensure that their media plans are fully aligned with the brand and business objectives and objectively serve best their purposes.
- Skills and knowledge:
The clients want to bring media planning and buying in house to boost the knowledge level in the organization (which frequently varies significantly both between clients and internally between different markets or business units) through hands-on experience and execution of the media activities. They often see this as a long-term investment in the capabilities that would distinguish them from other market players and would be the source of competitive advantage. Digital – and in particular – programmatic are seen as such strategically significant skills.
However, not every organization would be able to benefit from in-housing (or at least not in their current structure). The following needs to be considered before deciding to move the media services in-house:
- Strategy: what are the key reasons and how will this benefit the organization over the long term? Is there an internal long-term resource commitment from the key stakeholders? What will be the impact on the current agency model?
- Scale: is the media volume big enough to make it relevant and deliver positive ROI? Will it justify the investment in the team and tech?
- Media maturity of the organization: do we have the resources? How will this fit into the existing organization and ways of working?
- Talent: acquisition, growth, career path and retention, internal politics
- KPI’s: how to measure success? How to effectively benchmark externally to ensure we’re still generating positive value?
Agency models
If the advertiser is not ready (yet) to do planning and buying internally, then the choice is between a number of possible agency models (and variations thereof). Below you will find the main options:
– single agency doing both planning and buying across all media
– accounts split between planning and buying
– split between brands / categories
– split between media (e.g. offline vs. online)
In case of multi-market accounts, there is further geo-based differentiation, mainly driven by the advertiser’s degree of centralization: the same agency / holding across all markets / per region or a different combination of agencies across all markets.
Integrated vs split planning and buying
Having both planning and buying under one roof seems more streamlined, with greater synergies and fewer coordination efforts to manage this complex process. The information flow between the planning and buying team within a single agency should be (at least in theory) simple and it’s easier to hold an agency accountable for the results if they control the entire process. An integrated agency should also be more agile- something important if business environment changes fast and the reaction time is crucial.
The primary reason to separate planning from buying is to avoid the conflict of interest associated with agencies planning the media in accordance with their best interest and not in the best interest of the clients and their campaign objectives. Examples of such behaviour are: preference towards media contributing to the holding-level volume commitments, inclusion of inventory media into media plans (sometimes w/o client’s knowledge or understanding of the implications), or plans that are skewed towards the cost in line with the contracted cost commitments, but sub-optimal from planning POV.
The idea behind the split is to have one agency create (and be paid for) the best media plan, with another agency responsible for the buying and scheduling, therefore removing the embedded conflict of interest of a single agency. Moreover, having two agencies working on a single account theoretically increases competition (ability to shift SoW between agencies) and puts the advertiser in a position of lower dependency on a single supplier (this is also an argument for other multi-agency models). This model also preserves the media volume concentration and its benefits, as all the volume remains with the buying agency.
In practice, for it to work, there are certain obstacles to overcome. Advertisers typically have additional governance and coordination duties, which also require more assertive and media savvy team. The two agencies may not work well together: agency competition and resulting clashes, handling confidential information, longer communication chains, resource and responsibility duplications, to name a few. The agencies may be less eager (or charge a premium for it) to enter into such setup because of the higher burden / lower profits associated with the high control over the media plan during the buys. Therefore, such setup is likely an option for large and/or more desirable clients. Having two agencies on the payroll usually means duplicate resources and higher fees. Finally, it may also come at a premium in terms of media rates offered by the buying agency due to the overall model being less preferred by the agency (despite the media spend concentration). In other words, the agency is likely to propose higher media rates than if they would do during a pitch for the integrated account.
Agency per brand / category
This model is often seen at clients, where brands and/or business units are very independent from one another and pursue different business models, with separate P&L’s and Legal Entities. Such decentralized structure allows the brands to select agencies which best suit their needs, with tailored scope of work, teams, skills and tools delivered by each agency. It also allows for benchmarking and comparison of media rates and service quality, although one should be careful when volumes, audiences and scopes differ significantly.
The drawback of this solution is the deterioration of the synergy effects (fees, tech, etc.) and volume leverage, both in terms of specific rates as well as volume-impacted benefits. For any central teams, it also results in higher governance effort (e.g. more contact people to liaison with, consolidation of media spend and quality metrics, invoicing, etc).
Split between media
This is typically done when the agencies pitching for the business have major discrepancies in their capabilities and/or cost proposals for different media types. Most commonly offline and online media accounts are split, with the digital going to a specialized digital agency.
The drawbacks will again be higher management and coordination effort, potentially higher fees due to lack of synergies and likely issues with ways of working.
Single agency/holding vs. multiple agencies across countries and regions.
One agency across all markets is typically appointed for the following reasons: consolidation of the accounts resulting in higher leverage during the pitch negotiations / ongoing relationship management, as well as a single entity (agency SPOC or central team) for centralized reporting and market coordination. It also has an advantage of managing a single MSA vs. multiple contracts. Moreover, a single holding company provides consolidation in case of a lower footprint of a single agency (within the holding) in the covered markets. For example, agency A may be very strong in DE, AT and CH, but be a marginal one in the UK, FR and NL. On the other hand, an agency B from the same holding, may be much stronger in the latter markets, while the media buying deals are done by the holding company’s trading arm. This setup works better if the holding company has a tight grip over the individual agencies and can offer a single P&L approach for the client.
On the flip side, is usually means sub-optimal allocation in terms of media cost commitments, team quality and market preference. I am yes to see a multi-country pitch, in which a single agency is best in media costs, fees, teams and strategic assessment across all markets. Typically, the resulting single allocation is a compromise, with both the money left on the table and some country teams not having their preferred choice. Furthermore, in my experience the synergy effects central teams hope for do not live up to the expectations in reality and the coordination of all markets by the agency central team can be quite a bumpy ride. This also applies to the single P&L approach, because unless the holding company can fairly redistribute the value between the agencies, the agencies with low/negative P&L balance will be the source of relationship issues.
Other strategic considerations
Apart from make-or-buy decision, one should take into account other factors:
- internal controls requirements: determining e.g. the frequency of contract reviews or restrictions on a single source supplier
- sources of leverage in the negotiations with the agencies and media owners: e.g. will the future media spend increase/ expand to other markets, or will it shrink /shift over time
- time and relationship dynamics: agencies participating in the first media pitch may not necessarily want to take part in a subsequent one, especially if they didn’t feel treated fairly during the first one
Once the strategy is set and aligned internally, the next step would be to implement it accordingly. In the next set of articles I will cover the preparation and execution of an effective media pitch.