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What are the different factors to consider when setting media delivery strategies? Wojciech Raś, Managing Director of Progmatic Media, explores the pros and cons of media planning and buying in-house, outsourcing and single agency setups.
Gaining Full Control
“In a series of articles, I will be covering the various stages of a holistic media governance process to effectively manage and have full control over your media activities. As with most processes, it starts by putting the right strategy in place” -Wojciech Raś, MD Germany of Progmatic Media
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 an obvious truth delivered during pitches by nearly all media agencies. So, how do you go about making it happen?
There is an obvious interplay here between the quality of creative material and the results of the campaign. Bad creative is hardly expected to produce great results no matter what 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 correctly to deliver the desired results.
So, while good media execution is not the only factor deciding success or failure for a brand, given the weight of the media budgets within the overall marketing spend of the company, it will have a significant impact on awareness, brand recognition, preference, which in turn will 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 over dependence on 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. These 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 or 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 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 too!)
The most common reasons for in-housing are:
Advertisers often feel that the agencies fail to bring in high quality teams, tools and skill-sets 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 of lower seniority and skill-sets. Tools and solutions presented during pitches often turn out to be at a substantially higher cost or that the technical capabilities are far more restricted than originally promised. Ways of working do not match the client requirements, resources or setup, causing inefficiencies and frustration on both sides, resulting in deterioration of the client-agency relationship.
Clients often believe that they are able to deliver better overall value on their media activities than that 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.
While 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.
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:
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 are the main options:
In the case of multi-market accounts, there is further geo-based differentiation, mainly driven by the advertiser’s degree of centralization: the same agency 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 co-ordination 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 that might be crucial if the business environment changes fast and the reaction time is crucial.
However, the primary reason to separate planning from buying is to avoid the conflict of interest associated with an agency 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 agency volume commitments, inclusion of inventory media into media plans (sometimes without the client’s knowledge or understanding of the implications), or plans that are skewed towards the cost, which is in line with the contracted cost commitments, but sub-optimal from a planning point of view.
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 makes the advertiser less dependent from 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.
However, in practice there are certain obstacles to overcome for it to work.
Advertisers typically have additional governance and co-ordination duties, which also require a more assertive and media savvy team. Two different agencies may not work well together for a number reasons including agency competition and resulting clashes, the handling of confidential information, longer communication chains as well as resource and responsibility duplications, to name a few.
In addition, agencies may be less eager to enter into such set-ups because of the higher burden and lower profits associated with the higher control over the media plan during the buys (or charge a premium for it). Having two agencies on the payroll usually means duplicate resources and higher fees. Therefore, such a set-up is more likely to be acceptable to an agency if the client is large or more desirable account.
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 buying 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 marketing and procurement teams, it also results in higher governance effort for example, more contact people to liaise with, consolidation of media spend reporting 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 co-ordination effort, potentially higher fees due to lack of synergies and likely issues with ways of working.
Single agency or holding company 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 single point of contact (SPOC) or central team – for centralized reporting and market co-ordination. It also has an advantage of managing a single MSA vs. multiple contracts.
Moreover, a single holding company provides consolidation in case a single agency has a lower footprint in the covered markets. For example, agency A may be very strong in Germany, Austria and Switzerland, but be a marginal one in the United Kingdom, France and the Netherlands. On the other hand, 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, it usually means sub-optimal allocation in terms of media cost commitments, team quality and market preference. I am yet 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 that central teams hope for do not live up to the expectations in reality and the co-ordination 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:
Once the strategy is set and aligned internally, the next step would be to implement it accordingly. In the next article I will cover the preparation and execution of an effective media pitch.