Should A TV Station Be Able To Approach An Agency's Clients Directly?
Recently, MediaWeek in the UK asked a panel of industry experts "Should Channel5 be approaching Omnicom clients directly?" as part of its bid to resolve a major trading dispute. Channel 5 is one of the main national TV networks in the UK.
ID Comms was invited to contribute to the analysis and our view is that Channel5 is right to encourage all marketers, not just Omnicom clients, to challenge the way their TV investment is being managed by their agency trading group and furthermore, to investigate what motivates these kind of stand-offs between agency and media vendor.
The bold move by the channel saw them send letters directly to Omnicom's media clients in the UK encouraging them "to take independent advice from your media auditor". The letter was seen by the Financial Times who reported on the continuing dispute between the two media companies and this reignited the UK trade press onto the story.
Asking such questions shines a bright light on the TV market and the methods employed by large trading groups like Opera, Amplifi, Magnaand GroupM to engineer volume deals that can bind all agency clients to the same terms.
Hopefully this spat between C5 and Omnicom is a further sign of the vendor market pushing back harder on the tyranny of aggregate agency volume trading. The current model suits nobody except the trading groups and those (few) clients who care only for lowering media pricing and not a hoot for improving quality or effectiveness.
“Brands should be taking a more proactive role. All agency groups can buy well and the spread of pricing between them is very narrow. What adds value is the quality of their people and planning. Volume deals can compromise both.”
Tom Denford, MediaWeek, 5 Feb 2015
Where we disagree with Channel5, is with the suggested cure: The broadcaster suggests clients talk to their auditors to get a new perspective on its dispute with Omnicom. Our view is that auditors are probably the last people you want to ask for advice in this area, whilst they are largely independent and have a perspective on relative pricing, they're typically obsessed with continually lowering the price of media and so have, ironically, been rather complicit in the creation of volume deals. Auditors tend to like these deals because improvements in relative pricing looks like a saving for their clients as well as making for positive audit results.
What auditors generally miss, however, is the importance of the media planning process and how the decision to pick one channel over another should be based on insight and what's right for the client's brief, not what best fulfils an agency's trading commitments to ITV (or any other broadcaster). This is the important part of the equation that auditors tend to overlook.
All agencies can buy well and the spread of pricing between these giant media buyers is so narrow that what really adds value to brands is the quality of agency people and their planning. Agency volume deals can compromise both.
Grouping a brand's media spend with a lot of other brands competing for share of voice for the same TV audiences, simply in order to secure better pricing is a flawed approach in our opinion. It creates the risk that the strategy and planning behind those media buys will be significantly compromised in order for the agency to meet its commitments on agency TV deals.
At a time when gaining competitive advantage over your rival brands is everything, we encourage more brands to challenge volume deals that can bind all advertisers to the same bland terms. Brands should be taking a far more proactive role in their media buying and most importantly ensure that, as far as possible, a media-neutral planning process is allowed to take place at the agency.
All TV pricing is relative but what really matters is the value or outcome that a TV spot can achieve. The real issue here, and what Channel5 is rightly trying to draw attention to, is potentially how little insight brands have into the way agency trading groups use their money and who benefits from aggregate trading. As a client you want to be reassured that 100% of the benefit of these negotiations sits with you, not the agency.
Channel 5 are right to encourage brands to ask this simple question and I hope Omnicom will respond and perhaps share the rationale letter that they sent to their clients last year explaining the move away from Channel5.
As a marketer, here are five simple questions to ask your media buying company:
1. With which major media vendors do you operate agency deals and where do these have annual share commitments?
2. Roughly, how much of my media spend is involved in these agency / share deals?
3. What benefits do I derive from these deals, beyond your claim of cheaper pricing?
4. Do your clients receive, collectively, 100% of the benefit of the agency trading in this way?
5. If we wanted to exclude ourselves from these volume deals, how would we do this and what would be the implications on price and quality?
The responses don't require long agonising presentations, just a few lines email. With the information received, you are instantly empowered to start making more proactive decisions about your media investments, whether you decide to stay within group deals or not.