Tom Denford
By Tom Denford
Feb 18, 2013 11:17:15 PM

The Media Buying Business Is Due It's Own 'Horse-Meat' Scandal

 

Unreasonable pressure to reduce costs in the food business has lead to horse meat finding its way into beef products in the UK. With the benefit of hindsight, we can all see that the relentless drive for cheaper and cheaper food resulted in the product quality being forced below generally acceptable standards (i.e. horse being presented as beef).

Drawing a neat (or should that be meat?) parallel to a popular and over-commoditised product a little closer to home got us wondering if the media buying business is at a similar risk of being embarrassed by unacceptable quality standards caused by a relentless demand to cut costs?

The CEO of Iceland, a well-known budget supermarket chain in the UK has claimed in the  media that consumers should blame local governments for falling standards, who as guardians of the biggest and most influential food supply contracts (for public services like hospitals, prisons and schools) apply the most pressure on suppliers to cut cost. The accusation is that local governments are awarding these contracts to winning suppliers based ONLY on the lowest cost. This, the story goes,  has lead food suppliers to find ever more inventive ways to deliver meat products cheaper and cheaper.

Inevitably, you might say, the quality of the product suffers as fillers, poor cuts and even in this case different animals get passed off as beef in order to meet pricing commitments: The quality of a product being defined solely by its cost.

There is a significant risk of the same scandal befalling the media industry soon: Agencies are under frequent pressure to find savings in media spending as many of their clients implement company-wide cost-cutting measures. Like in the food business, this has made the price of media more important than the quality delivered which affects the value delivered to the client's business (for example in terms of potential sales that advertising might generate).

The focus on price prioritises quantity over quality every time and the inevitable result is that standards will fall.

It is well discussed in the boardrooms of agencies around the world, how to manage the single-minded focus of their clients who want to cut marketing costs at every opportunity. It is acknowledged among CEOs this is simply unsustainable and they are struggling to find ways to shift the debate from price to value and escape the vice-like control that a price obsessed client has over their business.

Inevitably this may lead some desperate agencies to find creative ways to keep delivering a cheaper price to clients. Media auditing practices have evolved to be able to tell clients the price of media in many languages, but may ignore the value of media delivered. Media budgets are more frequently being considered "a cost to be managed" rather than "an investment in growth". This explains why many competitive agency pitches are driven by a cost-saving ambition - increasingly these days requiring under-written guarantees of savings. No wonder exasperated agency bosses fear the next RFP requesting "this year's 10% price cut".

Diligent media management (the investment of a company's money into media as a lever for growth) has to be about more than just managing media costs. The price paid is an important element in a value equation and provides a critical benchmark from which to identify ongoing value improvements - but it is not the sole metric of success in media. Delivering a realistic Return on Investment for marketers requires that the price paid for media is continually compared to the value delivered by media. We refer to this as the "productivity" of a media buy.

A media industry obsessed with constantly lowing price doesn't serve anyone's interest and will lead to horse-meat style scandals becoming commonplace in our commoditised industry.