Media Guidelines for Procurement Officers: Media is More than a Commodity

Typically brands invest a third or more of their total marketing communications budgets in marketing to the retaildealerfranchiseagent trade These budgets are designed to support retailers39 and dealers39 own marketing efforts drive retail slotting allowances shelf space and underwrite the expanding universe of mobile and instore media including the advanced investments required to capitalize on beacon technology Brands invest the largest share of their total marketing communications budgets in consumer sales promotion and direct marketing also known as consumer activation Only an average 30 of the total marketing communications budget is invested in traditional media advertising and this is where procurement officers are taking controlMyersBizNet has forecast a continuing shift of belowtheline budgets to mediabased marketing and several major media suppliers such as Viacom Scripps some magazine publishers and a small handful of digital companies like Thrillist are investing in resources tools and teams who are experienced in retail trade and consumer sales promotion These teams are focusing efforts directly on vendor programs and are also targeting agencies that specialize in consumer sales promotionMarketers also use high profile advertising investments such as major sports media primetime network television major TV events wellpositioned outofhome advertising and prestigious print media as sales tolls to encourage retailers to purchase more products and to communicate support for affiliates dealers franchises and local agents Media companies that deliver this value must focus efforts on communicating their enhanced value for trade marketingModern procurement officers recognize the enhanced premium value of investments with media suppliers that convert directly into improved relationships with the retail trade and that fulfill commitments made to the trade by sales and brand management Conversely the vast majority of media spending is intended only to achieve limited goals of awareness interest and brand message recognition These budgets will be subjected to intense downward pricing pressure by procurement officers who capitalize on growing media fragmentationMedia suppliers who are targeting more of their sales and marketing initiatives directly to clients must understand that databased and contentquality messages focused on media superiority are mostly irrelevant in a commoditized business model Instead they must demonstrate how they can support their clients39 efforts to influence retaildealer trade partners and activate consumers to purchase offline products and servicesMedia suppliers who want to generate premium pricing for their inventory must be able to move the budget conversation away from the procurementled media budgets and toward trade and consumer sales promotion budgets that directly influence and activate their clients39 customersSavvy media suppliers are developing opportunities that deliver both traditional advertising plus trade marketing benefits Sports rights holders teams and leagues are the most advanced in applying these benefits Walk through any major supermarket during football season and you39ll see NFLrelated promotions featuring multiple brands Join Scripps Networks on a tour of Napa and you39re likely to be joined by a handful of major distributors and retailers or take a closer look at the huge Bobby Flay cardboard cutout in your local supermarket and it39s probably funded with trade marketing dollars shifted into The Food Network media budget Join a client meeting with Viacom39s Scratch team and you39ll hear more about building consumer activation and retail sales strategies than you will about Viacom39s media propertiesIn my own days as director of marketing at CBSTV Stations I was responsible for developing extensive vendor programs designed to convince the fashion industry to underwrite their retail partners39 major TV campaigns in return for promises of increased product purchases These initiatives led to the growth of the designer jeans category and to major TV campaigns from Bloomingdales Saks Fifth Avenue The May Company Robinson39s Venture Stores and many more Once the decisionmaking process flowed away from the merchandisers at the retailers and to the ad agencies and away from tradevendor support investments and to advertising negotiations focused on media cost efficiencies the budgets almost completely dried upAlmost all supermarket advertising budgets that promote specials and discounts are pulled from vendor support budgets amp8211 also known as coop and trade marketing budgets Once the chief marketing officers of these retailers shift their focus from vendor support budgets and sales promotion to brand equity building and advertising their media ad budgets begin an inevitable decline toward zero Advertising media budgets that are focused on reach frequency and awareness will increasingly come under the aegis of procurement officers who will rightfully subject them to intense costefficiency scrutiny By shifting the value proposition of media value to belowtheline trade promotion in support of distribution dealers retailers franchises and agents media sellers and procurement officers can become partners mutually dedicated to delivering valuebased results rather than costefficiencyMedia Consolidation is GoodMedia executives have fallen prey to the easy route of blaming procurement for all the industry39s current woes Some of their complaints are wellfounded The reality is however that procurement is here to stay and these efficiency experts will gain increasing responsibility for and authority over media and marketing purchases The current intensity of media fragmentation will not soon be offset by countervailing forces of consolidation and increases in demand but these forces are inevitable and ultimately will prove to be a positive for the media industry marketers and yes even for procurement officers who benefit by fragmentation and disintermediation While advertising demand is projected to grow at an average annual rate of three to four percent for the next decade advertising inventory supply will increase at a 15 annual rate Procurement officers need to be aware that while the expansion of media supply will continue unbridled there is significant value to continuing their companies39 relationships with the small cadre of their large legacy media partners While the greatest cost efficiencies may be gained by spreading budgets among an expanding universe of small highly fragmented linear and digital suppliers across multiple media there are compelling reasons to concentrate a large share of budgets among a few key media suppliers There are important reasons for this and one is that these large players will continue to consolidate Just as it39s unwise for manufacturers to forego relationships with WalMart Target Macy39s Best Buy or Home Depot it will prove to be unwise to give up valuable shelfspace with those companies that dominate the media landscapeBeyond this reason there are also good business reasons embedded in the realities of media buying execution Those seeking a quick and easy tutorial on the basics of media planning and buying can read these commentaries and one short tutorial book and receive most of the education they require Before reading them however continue reading this threepart guide to media procurement below which provides updated and relevant context for operating in a digital and increasingly fragmented media ecosystemFive Emerging Principles for Achieving Advertising and Marketing SuccessFive Dimensions of Advertising Effectiveness Part 1 Five Dimensions of Advertising Effectiveness Part 2 A mustread for all those interested in comprehending the intricacies of media planning and buying is the late and great Erwin Ephron39s Media Planning From Recency to Engagement Media is More than a CommodityFirst and foremost for understanding media is getting a handle on the traditional media buying priority of achieving reach and managing message frequency While spreading media buys across an expansive ecosystem is often a tool for building cheap reach when executed exclusively as a means for achieving cost efficiencies it will invariably reach higher concentrations of heavy media consumers within key target audience groups and increase frequency while depressing reachLeading media suppliers who deliver content across an array of audience demographics and psychographics can manage inventory distribution to maximize reach and limit frequency Procurement officers who are relatively new to the media business will quickly learn that some research models currently in use to identify reachfrequency are grossly outdated amp8211 overstating reach and understating frequency As the business becomes more competitive media suppliers will buildpredefined reachfrequency parameters and guarantees into their deliverables using more advanced and modern tools In the linear TV medium Simulmedia has access to settop box viewing data from millions of homes and offers a unique reachfrequency analysis at their website that demonstrates the huge variables in actual vs reported campaign reachfrequency dataamp183 Procurement officers who are focused on generating improved cost efficiencies from advertising investments must first gain an understanding of the dynamics of reach and frequency matching their brands39 campaign goals and target consumers with appropriate and necessary levels of targeted reach and frequencyAnother reason for building relationships with a select cadre of targeted premium media suppliers goes beyond the obvious opportunity of gaining negotiating clout Just as the retail business has consolidated among fewer dominant players media companies are undergoing a similar albeit slow process Procurement officers are wellschooled in these dynamics and their negotiations rarely focus exclusively on price Depending on the category procurement officers use consolidation to their advantage although intuitively it should work to their disadvantage Consolidation is the single greatest tool for costsavings within almost every category of products and services These cost savings are passed along to clients and ultimately to endconsumers while at the same time enabling vendors to avoid radical commoditization In the media industry fragmentation is rampant and downward media cost pressure will accelerate This will inevitably force greater consolidation as well as industry constrictionamp183 While there is dramatic diversity among media suppliers a growing priority among the largest media vendors is to offer their best clients advanced marketing resources promotional support and informedvalue propositions Smaller media suppliers are far less able to compete in this marketplace While media vendors are adapting to the demands of programmatic buying realtime bidding and automated transactions many are also developing assets to minimize the share of their inventory that is subject to commoditized pricingThe magazine industry has long been at the forefront of providing integrating marketing and promotional support along with their media inventory The TV industry has been stepping up its investments Jeff Lucas head of sales for Viacom Media Networks recently commented to MyersBizNet quotWe need to rise above the media clutter and differentiate ourselves amp8211 and do it quickly The business is at a tipping point amp8211 so much is happening at once We have to stand out and deliver the most value for the dollar so we39re taking integrated marketing to a new level in a comprehensive industry initiativequot Several other TV companies have invested heavily to differentiate themselves and take advantage of their scale as outlined in this MyersBizNet report

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Media Guidelines for Procurement Officers: Media is More than a Commodity

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Jack Myers

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