Media is in the midst of a pricing crisis. We need to fix it to be effective
Henry Innis thinks we're pricing media in a way that's ineffective, and bad for clients. As he asks: You wouldn’t buy crap steel to build a bridge, so why are you buying crap media to build a brand?
It starts with a pitch.
We’ve all seen the story. Media agencies go into a pitch. Many of them have wonderful thinking. But when push comes to shove, the criteria used more often than not is the cost of media that agency is able to commit to — the effective price paid.
Publicly, agencies have complained about it, some of them vocally.
Clients, particularly marketers, seem to also admit it’s a problem. But with procurement and finance departments asking for clear KPIs, it’s not always a problem simply fixed. There are myriad reasons why. But fundamentally, it comes down to how we view and price media.
How do we do that?
Largely, it’s based on cost to reach someone. Most channels have a variation on that metric. GRPs [gross rating points], for example, are TV’s way of representing reach. In digital, CPM [cost per thousand impressions] is often the number most are asked to focus on.
That’s a big problem. Mostly, because when you look at the data, not all reach should be priced equally.
Why?
Reach doesn’t equate to impact. If you’re on a shitty site for two seconds riddled with bots, it doesn’t really matter how many bots or how much ‘reach’ you get. You’re not going to see a sale.
Issues like brand safety, ad fraud and ineffective marketing are largely a consequence of a race to the bottom on price for the supply of media, without considering the effectiveness of that media in models. It’s like buying low grade steel for high grade construction.
You wouldn’t buy crap steel to build a bridge, so why are you buying crap media to build a brand?
That’s why I suspect the next big issue for our industry to solve will be building a more efficient and effective view on data to drive a price for effective media, instead of just efficient media. The good news is it’s now possible with a combination of cloud technology, statistical automation and the productisation of media analytics.
More effective market pricing isn’t without precedent. In the 80s and 90s, the bond markets went through similar issues — largely being priced on the cost of a bond. It created an ineffective market, and hedge funds and traders weren’t able to make effective decisions on their clients’ behalf because of that market problem.
Then along came a company called Bloomberg to solve it. Bonds and the hedge funds that trade them owe a debt of gratitude to Bloomberg as a result.
I think there will be a similar, emerging trend in the media market.
We call it media investment analytics, and my suspicion is it will be the antidote to the race to the bottom created by the first wave of programmatic.
And if we solve the media pricing problem, we might come a long way on prioritising effective, rather than efficient, marketing for our clients.
Henry Innis is a co-founder and managing partner at Mutiny. Mutiny’s core focus is WarChest, a media investment analytics product that helps marketers model and predict financial returns of brand, media and marketing activity.
Wow how trail blazing. Clients thru procurement people as opposed to marketers who understand brand sole charter is to screw every last $ out of pitching agencies. Some creative maths wins the account and then the media get asked to deliver on totally unrealistic deliverables. So lots of spots cheap cpt and no one sees the spot and marketers wonder why the brand has no equity and sales remained stagnant.
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Henry, a global procurement person once told me “Media was the second oldest commodity in the world, after advertising”. There is the problem. Marketers would invest in media to deliver a strategy, the procurement approach (which we always advise against) is to buy media on price. Unfortunately the agencies have played along and often provided price positions that were clearly unsustainable, if not down right unachievable. But the closer we can get to investing based on projected ROMI (M for media if not M for Marketing being media and the message) the better.
Darren, how do you define ROMI? Market Cap growth, brand equity valuation, or sales made in the next quarter? My guess is that most Marketing ROI is defined as performance based short term sales, hence the enduring race to the bottom to buy cheap media that is not effective. Do the media agencies that plan and execute campaigns carry the right goals, are they set appropriately in the first place? That’s even before we get into the subject of opaque agency trading deals that skew truly independent buying against the interests of their clients.
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So, WarChest is a media investment analytics product.
And the head honcho says “GRPs [gross rating points], for example, are TV’s way of representing reach.’
Well that’s news to anyone in media strategy, media planning or media buying.
TV Gross Rating Points (GRPs) is merely the sum of the individual programme/spot ratings in a TV campaign . It is the ‘weight’ of the TV campaign, not the reach of the TV campaign. There is a clue in that GRPs can (and often do) exceed 100. Reach is the proportion of the population exposed to the campaign so it can never exceed 100% (unless you’re using Facebook’s reach estimator for example).
However, you can derive the reach from GRPs if you happen to know the average number of times that the ad was seen among those who saw the ad at least once (or a frequency distribution from which can derive the average frequency). That’s why it is referred to as R&F – they are inextricably linked.
In fact GRPs is not a TV-only measurement. R&F (and hence GRPs) can be used by any medium. Makes you wonder why other media are more reluctant to follow sound media placement strategy.
That’s all Media 101 – to most people in our industry.
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How do you objectively measure the impact on brand-building work – eg making and placing a brilliant and emotive ad campaign?
May not see a sales uplift in short term but may absolutely see deepened customer loyalty long term.
Client CMO/CFO sees no major sales growth, so perceives the campaigns made no difference.
There is an inherent assumption in all this that marketing effectiveness can be measured reliably. I say it cant.
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If you think GRPs are a measure of reach then I see a more fundamental problem for your business than pricing
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It certainly is Media 101, and succinctly articulated here.
However, as to just how widely that is fully understood in our industry – and I’m talking just the media-agency side! – is an open question.
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