In Media, 'Multiplying Value' Should Replace Mantra of 'Cutting Costs'

When Clients Ask Media Agencies to Cut Costs, They're Doing More Harm Than Good

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When the U.S. was climbing out of the Great Recession, the prescient economist Nouriel Roubini wrote: "Nobody's ever cut their way to prosperity."

Of course, financial responsibility and efficiency are core to our business. But the increasing focus on treating media as a commodity threatens a big opportunity to transform the advertising media business into something more valuable and effective.

Historically, the industry has focused on delivery, accompanied by client directives to cut costs. But in our attention-starved world, "cutting costs" mostly leads to reduced effectiveness.

Today, smart clients will choose to focus on impact -- and seek opportunities with their agencies to multiply the value of their media investment.

We love the idea of the deal
I grew up in a home on a tight budget. My mother would return from Marshalls with home decor purchased at 70% off, and my father would say, "70% off something we didn't need." He was usually right -- what felt like a good deal rarely was, when we considered the ROI to our household.

Increasingly, I've heard leaders at media agencies (holding company-owned and independent alike) confess that to win business, they've guaranteed 15% to 20% lower rates during the pitch. Hard to compete with that, right?

Except there's sleight-of-hand at play. First, the agency positions purchased-media as a commodity -- as if it's somehow all interchangeable. Then it explains how progressive ad-tech partnerships, proprietary data models or unique publisher relationships allow them to buy media at lower rates.
The reality is that these factors are rarely the true driver of the savings. Instead, the bulk comes from replacing premium partners and placements with cost-friendly alternatives.

Of course, lower rates can be a factor in driving efficiency. But many issues plaguing our industry -- from fraudulent ad impressions to overbearing corporate procurement departments to the dissolving of trust between publishers and buyers -- can be directly attributed to delivery-based thinking that primarily emphasizes CPMs, cost per GRP and, more recently, cost per video view.

When a client buys a dream of lower costs, it gets what it pays for. Unless marketers have a system in place to measure the impact of their media investments, they don't get what they hoped for.

An alternative
Direct-response marketers use cost per revenue as a media currency. And they know better than to believe that all ad impressions are created equal. (This is why attorneys specializing in mesothelioma gladly pay $500 per click to Google, exorbitant CPMs be damned.)

Still, many marketers have yet to adopt this thinking, typically because measuring the impact of broadcast-TV buys and branding campaigns is comparatively messy. Even media-mix modeling firms treat each media channel as a set of commodities.

So how can marketers establish their own custom, impact-based media currency?

Create a unified system of measurement, including:

Define purposes for advertising with focus on the customer-decision process.

  • Catalogue key media investments across channels.
  • Develop a high-level segmentation scheme.
  • Acquire data for external variables affecting your business.
  • Organize key behavioral and sales data.
  • Create marketing experiments to measure perceptual impact of marketing.
  • Integrate a best-in-class multi-touch attribution partner.

With this system of measurement, a marketer can isolate key media channels, partners, placements, dayparts and more in delivering return-on-marketing-objectives (driving awareness, favorability, consideration, cross-sell or more). CPMs and GRPs become secondary to custom metrics such as cost-per-favorability increases.

The result? Marketers can clearly see which portions of their media buys deliver on their objectives.

Opportunities will then arise to go further and multiply the value of a media investment:

  • Shift the focus from channels to audiences.
  • Focus sharply on overperforming audiences.
  • Assess how your ad creative works within your media placements.
  • Align paid, earned and owned media so that it deserves to be shared by consumers.
  • Measure success at the audience or user level across all channels.

None of this is easy. But as Jimmy Dugan says in "A League of Their Own": "It's supposed to be hard. If it wasn't hard, everyone would do it."

Shifting from a delivery-based approach to an impact-based approach is a massive cultural change for both clients and media agencies. But making this shift is the right path for marketers to succeed in a fast-changing and attention-scarce media climate.

When clients ask media agencies to cut costs, they're letting them off easy and doing themselves more harm than good. When something sounds too good to be true, it usually is.

Now's the time for the industry to move beyond the illusion of the deal, and to embrace the opportunity to multiply the value of our media investments.

Mike Margolin is senior VP-director of audience strategy at RPA.

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