Agency Remuneration - The Key To Just About Everything...
Good media performance is no longer just about media discounts. Media pricing is now so low from competition that is has created a commoditised market. Today, what will differentiate one media agency from another is not pricing but how much value they can create from a fixed media budget.
The skill of a modern media agency needs to be less about access to individual media and discounts and more about choice – making decisions in media which have the greatest positive effect to grow a client’s business. And so, as the media market has rapidly evolved in the last 15 years, so too must the model for how agencies are measured and rewarded to make the right decisions.
In recent years with increasing business pressure on marketing departments, there has been an increasing focus on marketing to deliver MORE with LESS. More sales, traffic, brand awareness etc. with less budget, less people, less suppliers and less overall resources.
At the same time there have been huge economic, social, technological and behavioral shifts at play which have had significant effects (many positive) on the media and marketing industry. The primary change has been the continued fragmentation of media audiences away from mass channels into more niche media consumption. Fragmentation has also diluted the general quality of media environments, making it important for the media agency to be able to identify the best quality media spaces and not just the best audiences.
A positive of media fragmentation is that it has created far more opportunities than ever for brands to connect efficiently with their most valuable audiences, because once you have found them, you can target them very directly and engage them very efficiently.
However, the ongoing fragmentation of media means that your media agency is having to make many more, important choices on your behalf than ever before:
Choosing the most effective channels
Choosing the best way to activate in those channels
Choosing the best complementary mix of channels
Maximising ‘free’ media distribution (e.g. social media)
It is how and why those choices in media are made that is the key issue. Clients need to ensure that their agency payment model is incentivising the right choices to be made which create the most value for the client.
Why? Because different choices in media may also have different impacts on the media agency’s income and therefore the way the media agency is incentivised from the outset will naturally have an influence on how they make choices in media. Having a remuneration model which aligns the media agency closer to the client’s business goals is fundamentally important to generate the most value for the client, in the choice of media.
Put simply, the agency’s opportunity to make a profit should lie in making choices which generate the greatest value from the client’s investments in media and communications.