EMM in the News

Snakes and ladders

by Stephen White and Charlie Dawson

INTERNATIONAL MEDIA TODAY is a game played for high stakes. At EMM, we are always talking to advertisers. Our year-end survey of advertisers’ attitudes gives very revealing feedback. We get a glimpse of major multinational advertisers’ hopes, fears, ambitions, concerns and frustrations, as they grapple with the growing complexity of the media world, and the agency services that connect their brands to those media.

Risk and reward

Compiling the survey report, and reading back advertisers’ verbatim comments, it occurred to us that media was very similar to playing a game of snakes and ladders, with lots of unexpected ups and downs. Often starting out with big budgets, ambitious objectives and clear strategies, senior advertisers still seem to see media as a minefield, ever ready to spring reverses, pitfalls and traps for the unwary. Every ladder laboriously climbed risks putting their brand in the path of some insidious snake. Hence the idea for our seasonally-influenced snakes and ladders game. As 2004 draws to a close, we see the opportunity for a timely reflection on the risks inherent in managing big international media budgets, and the rich rewards if you get it right. The light-hearted parlour-game format may seem frivolous, but the intention is serious enough. Admapreaders who roll the dice and move their counters up (and down) the snakes and ladders board, will recognise some of the day-to-day problems, dilemmas and opportunities that beset them in real life. At EMM we certainly recognise these dilemmas, since our day-to-day business is focused solely on helping advertisers to climb the ladders and avoid the snakes.

More choice, less choice

So to our survey. At one level, many advertisers have never had it so good. Advertising media have seen an exponential growth of choice, both for consumers and users of the media. Conventional forms of electronic, print and outdoor media are now complemented by a panoply of multi-channel and internet driven communication and selling tools, creating a maze of message-vehicle choices. At the same time, choice has narrowed in other ways. Recent mergers and acquisitions among agencies mean that over half of worldwide media spending now goes through fewer than a dozen media buying entities, owned in their turn by a half-dozen mega marketing services groups. Media owners have followed the consolidation trend, with media selling power concentrated each year in fewer hands. Advertisers and agencies are able to access more media but through fewer purchasing points. This two-way pull – more choice, less choice – leaves advertisers in a quandary. Promotions aside, advertising media typically represent 60–80% of a brand’s variable costs, and yet senior advertiser personnel find themselves distracted by a dauntingly broad range of day-to-day issues, from pricing and distribution to packaging and new product development. Media is just one part of the things they have to worry about. In a typical client organisation, media is lucky to get 2% of senior executive thinking time. This is a worry, because advertisers’ media concerns are very real. Have we got the right media agency? Are we controlling them sufficiently? Are we motivating them correctly? How do we know we are winning? Where is all the money going? What are we getting for it? What to do about runaway media costs in some markets, and deflation in others? How to handle growing pressure from the competition? Global or local controls? And so on. The questions are never ending, and while many of the answers are easily available, agencies do not get enough quality time with the clients to discuss the answers.

What advertisers say

Over half of the sample, which responded to a 40–60-minute interview, hold global responsibilities including media, with a geographic spread spanning Europe/ Middle East, the Americas, and Asia Pacific. Just under half of respondents are focused on their domestic market. Four-fifths of them hold senior marketing or media management posts, the remainder being charged with purchasing or procurement. Collectively these individuals spend around US$10 billion a year on media, so we asked them about agency remuneration systems, accountability and getting the right media services for their particular needs.

Reward programmes

On agency reward programmes, the overwhelming majority favoured a mix of task-based fees and incentive payments, to keep their media agencies focused and motivated. In Europe basic media planning and buying services could be covered by a ‘fair but limited’ fee, they told us, with PRIPs (performance-related incentive programmes) added in to incentivise performance and reflect cost and quality achievements. Only Asia Pacific was still mostly in favour of flat percentage commissions on billings, by a margin of 70 to 30. Other geographies like the US were aware of the inequities involved, particularly in view of volatile budgets, but were not minded to change the commission-based status quo.

Quality, cost and people  

European respondents were clear that low costs and discounts were not worth rewarding if the quality delivered was allowed to sag. What they wanted, but were struggling to define, was value for money. Another much-cited priority was getting the best media people on to their business, and keeping them, as a way to gain discernable competitive advantage. There was a keen urge to incentivise these talented individuals, not just the company they work for. Agency personnel’s effort and commitment to client (as opposed to agency) priorities was seen As the most meaningful differential. Workload, as measured by timesheets, was widely distrusted as a justification for reward, though ‘auditable labour output’ was still seen as a requirement by many. ‘Fees shouldn’t just run like a taxi meter,’ said one respondent.

Keeping account

There was a widespread general conviction that carrots work better than sticks. Even among the PRIP enthusiasts, however, the ‘ladder’ of incentive had to be weighed against the potential ‘snake’ of complexity and overlap; ‘Too many mixed remuneration schemes and you lose control’, was a typical comment. Most of the clients wanted to ‘keep it simple’, though this often ran counter to the complicated needs of realistic cost and quality benefit assessments.

Transparency, accountability, metrics  

On accountability, the majority view was that total financial transparency had become an absolute prerequisite for doing business with a media agency. A strategy-driven media effort risked being ‘polluted’ if agencies were being counterincentivised by media owners to drive budgets in their direction. As to how and when full transparency was to be achieved, advertisers were more dubious. Meanwhile, clients rely more and more on measurement and accountability metrics, often accompanied by a mediamanagement programme linked to a PRIP scheme. Beyond policing the basic media-buying process and results, this can extend into operational approaches, strategic and planning skills, people competencies and tool deployment, even ‘intelligent learnings leading to innovation’. Definitions are critical in such ‘soft’ areas, and many respondents felt baffled about how to define their requirements.

Winning pitches, climbing rungs  

What do advertisers look for when they go shopping among the media agencies? In the respondents’ own words, it is a combination of individual and team professionalism (‘bright people doing good stuff’), insight (‘understand our consumers rather than our sector’), affinity with the client (‘enthusiasm, motivation and passion’), innovation (‘ideas we’ve not seen before’) and dependability (‘I need to trust them like my bank’). Most cited client turn-offs in media agency pitches? ‘Not listening’ and ‘Ignoring the brief’, ‘Senior [agency] people rabbiting on about structure’, speeches from ‘People we know are not going to work on our business’, ‘Tools that never get used … and don’t work anyway’, ‘Lack of preparation’, and – a big tactical no-no, this – ‘Offering last-minute extra discounts when they think they’re going to lose’. Beyond the vitally important people qualities mentioned earlier, clients look for informed curiosity, responsiveness, discretion and a real desire to build a long term relationship with the brand and the advertiser. Agencies need to impress more throughout the pitching process, not just on the day, and to think more carefully about selecting the people to represent their agency. Much to ponder as 2004 draws to a close.

We wish our advertiser and agency friends every success with whatever squares they will be landing on in 2005. May they all turn out to be ladders, and may they leave the snakes hissing with frustration in their wake. But should anyone develop ‘serpent’ trouble in the coming year, the snakecharmers at EMM will be happy to help.