Tom Denford
By Tom Denford
Nov 12, 2014 7:02:04 AM

Breaking Down The Fear Factor For Programmatic


It is time that marketers develop a stronger understanding of the medium that is going to dominate media investment in the near future - Programmatic Buying.

It’s all too easy to be put off getting engaged in the opportunities in programmatic. Scare stories about lack of transparency at agency trading desks, the margins being charged by independent suppliers and the potential for data to be misused might make you think this is simply too difficult to get into.

But no marketing or media director can afford to take that attitude. Equally you can’t rely on your agency to lead in this space; this is too important a development for you to take a passive role.

Programmatic approaches are going to dominate media investment in the future and you need to get smart about the opportunity that it offers. It’s going to affect your business and marketing increasingly in the coming years as more media opportunities are traded in automated spaces.

The key is to approach this space with a game plan. You need to try, test, and keep a close eye on what you achieve. The most successful brands in this space have adopted a test and learn approach over recent years and are now reaping the benefits.

Even if you haven’t taken the plunge already, it’s certainly never too late as long as you take time to consider your requirements upfront. That way you will know what success will look like and how you can define your improvements over time.

Right now no solution is perfect, from agency solution to independent providers to an in-house model, all have advantages and disadvantages but the key is that you have a clear idea of what you want to achieve and back it up with robust evaluation. That will help you identify the right option for your company.

Understanding whether programmatic is delivering the right result is less about the price paid and more about understanding the value of the consumer action each impression can generate. It doesn’t need to mean poor quality inventory either, a common misconception.

While most media buying is obsessed with continually lowering costs, automated buying optimizes the purchase of a consumer action in digital channels so the results need to be assessed differently.

What you need to define are the metrics that measure the value of the media you buy not just the price. This is more than just a semantic point because it highlights that a piece of media inventory – a banner or a video ad, for example – will have a different value to different brands.

If a piece of media inventory is more effective at driving a given consumer action for an automotive brand then it will be more valuable to that brand, for example. In fact this has always been the case in all media but brands now have the ability to measure that impact and assess the value scientifically, which they never could before.

This renders traditional pool-based media audit methods obsolete as the value of that impression will be different for every company, as proven by the auction-based nature of the automated buying process. Increasingly, it will matter less and less how much the price you pay compares to what others do, because what you are buying is likely to be fairly unique to your needs.

The solution is to seek continuous incremental improvements in price, but based on the delivery of the KPIs that are relevant to your business.

This is easier for some than others, of course. An online transaction or direct response business where consumers can be tracked all the way through to purchase or conversion will find it much simpler. But even for brand campaigns, KPIs can be set, tracked and optimized against.

Ultimately, every business buying digital media will be able to specify some digital conversion KPIs but if you have an offline transaction business, such as an FMCG brand, you need to define what the most appropriate KPIs are for automated buying based on what factors contribute to driving brand metrics or offline consumer actions.

Beyond this marketing challenge you also need to make some logistical changes to the way you conduct your business.

First, you need to check your contract with your media agency. It shouldn’t oblige you to use their trading desk and should give you the right to shop around for the best solution for your needs.

Second, you need to be clear about how using another partner, if that’s the best option for you, impacts on what you pay your agency and how funds can be diverted.

Thirdly, you and your procurement team need to be prepared to change the way you evaluate agency overhead. We recommend splitting out technology costs from agency overhead, as these will need to rise over time as head count in some areas of the agency reduces.

Agencies will embrace this as they generally want to move away from the limitations of time-based charging methods and want to be increasingly paid based on improved marketing performance.

Over time, improved data management and automation of buying will reduce agency staff costs but total overhead will increase as you will need to pay more for the best technology not just the best talent.

Also, you need to develop a clear strategy for data management. As with traditional media, insight drives efficiency, it’s just that in the digital world we call this “data”. Being able to continuously optimize the buying process by improving your ability to target the right consumers is essential and having a strategy for data management improves buying because it allows you to identify the most valuable consumers. Keep doing it and, of course, this improves over time as you learn more via campaign data.

Finally, if you haven’t already started testing your options then you need to initiate a sourcing process that will allow you to compare different trading desk and data management technologies based upon your precise requirements.

This should involve a side-by-side performance comparison of all relevant trading desk technologies. This critical process will allow you to evaluate not just the technical operations of each option and its terms of trade but also to test their actual ability to deliver your KPIs cost-effectively.

Only then should you obsess about how to incrementally improve costs over time but this will happen by adopting a test-and-learn approach, not by worrying about what others are paying.

This article was originally published in Media Post on 14-Oct-2014