Another Fine Mess You’ve Gotten Us Into - Steve Grubbs

The following is an excerpt from a conversation overheard between two marketing managers at a recent cable network Upfront presentation The names have been changed to protect the guiltyamp8220Hey Oliver How goes it Howamp8217s business at the Susquehanna Hat Company these daysamp8221 amp8220Hey Stanley Life is good Business is hectic We just completed a major review of our media buying agencies It was exhaustive Glad we only do that once every three yearsamp8221 amp8220Huh I thought you just conducted a review two years ago Did your agency not perform as expectedamp8221amp8220Actually theyamp8217ve done a great job In our previous review they guaranteed AND delivered nearly 10 million in media cost savingsamp8221amp8220Wow Soamp8230 why another reviewamp8221 amp8220Well our procurement guys have been talking to our media auditing agency and then they were contacted by a new business review consultant and collectively they believe there are still some media cost savings to be had They think we might be able to generate another 10 million in savings through a review Can you believe itamp8221 amp8220Well no actuallyamp8221 amp8220Yeah they think that if you periodically light a fire under your agency with a review every two or three years the agencies will ALWAYS find a way to generate more savings And if they donamp8217t then thereamp8217s ALWAYS another agency willing to step in and guarantee even greater savingsamp8221 amp8220OK Oliveramp8230 So how do you think they do itamp8230 generate those significant savings Doesnamp8217t that suggest youamp8217ve been overpaying for media for a long time Or your previous agencies were doing a poor jobamp8221 amp8220Well Iamp8217ve thought about that a lot Stanley and Iamp8217m not real sure But numbers never lie right I guess since the buying agencies have so much clout and leverage they just squeeze the media vendors a little harder Or sometimes they just ask them for amp8216favorsamp8217 You know itamp8217s a relationship business and these guys do each other favors all the timeamp8221 amp8220Well Oliver Iamp8217ve heard they mostly generate cost savings by changing the mix of your media buys You swap out high demand high priced media for lower demand cheap CPM mediaamp8221 amp8220Yup and they have lots of research that shows you can do just that without harming the effectiveness of your buysamp8221 amp8220Oliver Iamp8217ve also heard that there is a quid pro quo when the agencies ask for amp8216favorsamp8217 from the media sellers If they discount the Susquehanna Hat Company media buys then the media sellers expect the agencies to reciprocate with some amp8216considerationamp8217 with other client buysamp8221 amp8220Well why would I worry about that Iamp8217m protecting my companyamp8217s interestsamp8221 amp8220Right but remember that your new agency is in the midst of six other new business reviews How will they gain and give amp8216considerationamp8217 for all those clients Maybe that impacts youamp8221 amp8220So long as they deliver on the savings I donamp8217t really care Besides the guy who is leading their buying team for the agency is brilliant and heamp8217s guaranteed me 20 of his timeamp8221 amp8220Yeah I know him well We had drinks last week He was grousing that he now spends 60 of his time on new business and 30 of his time on staffing and senior agency management issues That doesnamp8217t leave much time for you or his 15 other major clientsamp8230 not to mention relationship building with top media suppliers Did you at least have them assign their top negotiator Darrin Stephens as your account lead Heamp8217s outstanding When we worked with him he literally saved us millions through negotiations and schedule maintenanceamp8221 amp8220Yeah Darrin is great He was in the pitch Heamp8217s our lead for now but weamp8217re still working out the staffing issues We were uh pretty aggressive in our fee negotiations so Iamp8217m not sure we can afford himamp8221 amp8220Well Ollie they never tell you when they put the second string to work on your account but I can tell you you get what you pay foramp8221We need to get back to basics and conduct media reviews based on which media agency can actually best help clients meet their media and business objectives These cost savingsdriven reviews all sound quite clever on the surface The media auditors client procurement agents and review consultants certainly believe so Then again they have a vested interestOn the other hand consider this First these agency reviews are exhaustive If the best and brightest media buyers are spending the majority of their time with these reviews they are not dedicating enough time to doing what they were hired to doamp8230 negotiate creative and business building deals The really top notch buyers seize opportunities react to changing market conditions and will save their clients millionsamp8230 if they have the timeSecond the amp8220favorsamp8221 the agency buyers need from the media sales organizations to help meet savings guaranteesamp8230 those days are over Either those phone calls are no longer returned or the quid pro quo comes at the expense of other agency clients Further these requests are so commonplace and there is so much chatter today between buyers and sellers 90 of marketplace deals are negotiated within a very narrow range of price increasedecrease Third many of these media amp8220savingsamp8221 are numbers manipulations Call it what you will but most of these cost savings are achieved through adjusting and downgrading the media mix and any agency can do thatFinally throw in the agency fee reductions that are required in all new business reviews and well clients end up with barely sufficient staffing to manage the buy process That in turn assures mediocre performanceamp8230 and ultimately that leads to another reviewAs Stan Laurel would say to Oliver Hardy amp8220This is another fine mess youamp8217ve gotten us into Ollieamp8221Steve Grubbs is President and founder of Second Act Media consultancy Second Act Media is an advisor to companies working in the media marketing entertainment and sports industries Steve can be reached at stevegrubbssecondactmediacomRead all Steveamp8217s MediaBizBloggers commentaries at My Second ActCheck us out on Facebook at MediaBizBloggerscomFollow our Twitter updates MediaBizBloggerThe opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of MediaBizBloggerscom management or associated bloggers MediaBizBloggers is an open thought leadership platform and readers may share their comments and opinions in response to all commentaries

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Another Fine Mess You’ve Gotten Us Into - Steve Grubbs

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