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 guilty.

“Hey, Oliver. How goes it? How’s business at the Susquehanna Hat Company these days?”

“Hey, 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 years.”

“Huh? I thought you just conducted a review two years ago. Did your agency not perform as expected.”

“Actually, they’ve done a great job. In our previous review they guaranteed AND delivered nearly $10 million in media cost savings!”

“Wow. So… why another review?”

“Well 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 it?”

“Well, no, actually.”

“Yeah, 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 don’t, then there’s ALWAYS another agency willing to step in and guarantee even greater savings.”

“OK, Oliver… So, how do you think they do it… generate those significant savings? Doesn’t that suggest you’ve been over-paying for media for a long time? Or, your previous agencies were doing a poor job?”

“Well, I’ve thought about that a lot, Stanley, and I’m 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 ‘favors.’ You know, it’s a relationship business, and these guys do each other favors all the time.”

“Well, Oliver, I’ve 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 media.”

“Yup, and they have lots of research that shows you can do just that without harming the effectiveness of your buys.”

“Oliver, I’ve also heard that there is a quid pro quo when the agencies ask for ‘favors’ from the media sellers. If they discount the Susquehanna Hat Company media buys, then the media sellers expect the agencies to reciprocate with some ‘consideration’ with other client buys.”

“Well, why would I worry about that? I’m protecting my company’s interests.”

“Right, but remember that your new agency is in the midst of six other new business reviews. How will they gain and give ‘consideration’ for all those clients? Maybe that impacts you?”

“So long as they deliver on the savings, I don’t really care. Besides, the guy who is leading their buying team for the agency is brilliant, and he’s guaranteed me 20% of his time.”

“Yeah, 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 doesn’t leave much time for you or his 15 other major clients…. 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? He’s outstanding. When we worked with him, he literally saved us millions through negotiations and schedule maintenance.”

“Yeah, Darrin is great. He was in the pitch. He’s our lead for now, but we’re still working out the staffing issues. We were, uh, pretty aggressive in our fee negotiations, so I’m not sure we can afford him.”

“Well, 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 for.”

We 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 savings-driven 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 interest.

On 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 do… negotiate creative and business building deals. The really top notch buyers seize opportunities, react to changing market conditions and will save their clients millions… if they have the time.

Second, the “favors” the agency buyers need from the media sales organizations to help meet savings guarantees… 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 increase/decrease .

Third, many of these media “savings” 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 that.

Finally, 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 performance… and ultimately that leads to another review.

As Stan Laurel would say to Oliver Hardy, “This is another fine mess you’ve gotten us into, Ollie.”

Steve 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 steve.grubbs@secondactmedia.com.

Read all Steve’s MediaBizBloggers commentaries at My Second Act.

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