At a recent new business pitch our firm was grilled on our ability to negotiate the lowest possible media costs. The client perception was that a smaller agency would lack the clout to deliver low media costs. This is how we addressed this very good question.
It’s all about tradeoffs – essentially low price vs optimum value.
Low Price Models
There are essentially two models to delivering low cost media solutions: Bulk Media buying and Client-Centric volume negotiations.
Some media agencies tout as their advantage the ability to negotiate and hold bulk contracts (corporate buys so to speak…), getting their clients lower ad rates for which they might not otherwise qualify. We believe low-cost bulk rates inject bias into the planning process – the agency has an inherent conflict of interest in that it is obliged to fulfill contractual requirements with these vendors. What is the media plan’s true value if it was designed to achieve the agency’s objective, not the client’s?
In reality, the majority of agencies negotiate rates on a client-centric basis and use the client’s budget envelope as the starting point. Overall agency size doesn’t mean better clout and lower rates for its clients, it’s the experience and skill of the agency negotiators to optimize the savings or efficiency of the buy.
Creativity & Innovation
Negotiating for the lowest CPM or page rate can compromise media creativity and innovation. Media vendors who have given up reasonable profit margins are not inclined to collaborate with an agency seeking added value or innovation in a media buy. Rather than leading with a low cost, negotiation should include campaign objectives and insights, encouraging vendors to consider a range of criteria (that includes but is not limited to cost efficiency). In this way vendors become partners in creating a media solution based on customer insights while leveraging the strengths of their media assets or channels to a client’s benefit.
Agencies that negotiate hard on price points can disadvantage their clients in another way. Media vendors who have given up reasonable profit margins are not inclined to be flexible during campaign execution. Because they are not considered partners in the campaign’s success, they are less likely to extend “special” consideration for changes (e.g. when performance measures are less than stellar and change is necessary to achieve objectives). Making short-term changes to a campaign negotiated on low cost principles is difficult to do without increasing the cost. The low cost advantage disappears and there is no additional value to ensure the campaign’s integrity and focus.
Our position? Value at the Right Cost
We believe the true measure of a media plan should be value, not lowest cost. There is more to gain from a cohesive media buy where lowest possible price is not the primary driver. Of course agencies should strive to negotiate competitive media contracts on behalf of their clients – we just think it shouldn’t be the primary factor.