We’ve been consulting marketers on media effectiveness and efficiency for seven years now – yet despite the increasing role of contact management, the need for greater engagement, the development of online and the increase in content creation, the one question we keep getting is simple – “Is my rate
too high?”
Unfortunately, answering that question is not at all simple. Every marketer has their own objectives, their own target audience, their own media buying cycle and periods for advertising – factors which have a significant impact on media cost. Recently in one analysis in China for two brands in the same company, the brand with half the adspend has a Cost Per Rating Point (CPRP) of roughly half that of the larger brand. Go figure. Likewise another sports company’s rates were quite high versus others – until we learnt there was a specific request to only advertise in sports shows, thereby significantly reducing inventory on offer. In theory (in a perfect market), rates paid should be determined by matching supply and demand. For example, the supply of media airtime or media space (such as number of prime time spots available on a particular station, or ad pages in a magazine) verses the demand from advertisers:
l Limited number of ad units vs high demand = higher rates
l Wide choice of ad units vs low demand = lower rates
In practice, media is bought and sold in an imperfect market where accurate information of space available and real demand from advertisers is not usually freely available. Few individual advertisers or media agencies have sufficient buying power to truly influence demand – partly explaining why agency holding companies have combined their buying power to try and exert more pressure. Supply and demand is important but there are numerous other factors that also influence rates paid for example human factors such as the actual skill and experience of the person doing the negotiations.
Here are four things we recommend every marketer does:
Set and reward benchmarks
Too few marketers have a rigorous system of benchmarking in place to track year on year performance. Even those who do, don’t link that back to tangible incentives for the agencies. That said, when you change target audience or budgets, you need to factor this into the coming year’s calculation.
Use an independent analysis company
60 percent of the UK’s media is independently analysed, and this trend is increasing in other regions. Independent analysts work with a number of clients across different media holding companies, giving us insights into different approaches and practices. Every year, every public company invites an independent financial analyst in to review their balance sheet and revenue statement. They should be doing the same with their media investment.
Look beyond the rate
A simple rate comparison will never give you the right answer on your media performance. Just as TV buying is only a small part of what your media agency does, so it should be only a part of the total assessment. There are so many macro and micro factors from the brief to the insights to the strategy to the negotiation approach that should be analysed and considered.
Get involved
Taking a collaborative approach with client, agency and media owner together can only result in a more competitive offer. You need to do this without undermining the important role of the agency in the process, but it will give you greater confidence and transparency on rates, as well as give you greater leverage with a collective effort. With the economic downturn, there’s going to be more disparity than ever on media value. Unless you put the tools in place to measure yours, you will get left behind.