You don’t know you’re a good swimmer until you dive into the pool

by Martin Sambrook, International Media Practice Leader
Thursday, September 27, 2018

How treating media buying like a race can drive greater performance

To pool or not to pool – that is the question, particularly in the wake of changes in both market dynamics and media trading in recent years. Martin Sambrook, Ebiquity’s International Practice Leader for Media, argues that data pooling has never mattered more for driving media performance.

Media benchmarking is a well-established industry best practice in media management that has now been in place for almost four decades and is common practice in over 40 of the world’s major advertising markets. It has been repeatedly endorsed and supported by the world’s biggest advertisers and all major advertiser associations, including the World Federation of Advertisers at a global level, as well as the overwhelming majority of national associations.

As a media advisor for over 30 years, I’d like to explore why benchmarking has been so successful, and why the rise of more complex digital media ecosystems makes benchmarking even more critical today, especially for advertisers aspiring to be top performers.

To explain why benchmarking has been so successful, I’d like to turn to sports for a highly relevant analogy. In sports, top athletes benchmark their performance against their competitors, not just against themselves. No one wins medals for simply being faster than themselves. To be the best, you have to outcompete your peers. At the Olympics, it’s relatively meaningless to set a goal for swimming the 100 metres freestyle at 58 seconds when your main competitor has set the world record at 47 seconds. The same holds true in media investment. You may be buying media cheaper than you’ve ever bought it before, but if that price is more than twice the market average, you’re clearly not getting the value you deserve. In simple terms, top performers benchmark themselves against their peers, not just against themselves, to understand exactly how they measure up, and where they need to improve. Similarly, media benchmarking gives advertisers a great depth of understanding of the efficiency of the media bought in their name, and what their opportunities to improve this are. Let’s explore this in more depth.

Why data pooling matters

  1. Because media is increasingly complex

The increasingly digital media trading ecosystem means that media trading, planning, and buying is ever more complex today. This is precisely why advertisers need to understand the real competitive price of the available media options. Indeed, it was complexity that drove Ebiquity to widen our frame of reference for understanding agency pricing and value, to include agency trading group deals that go beyond individual client deals.

It’s now more than five years since Ebiquity acquired FirmDecisions, the world’s largest independent global marketing compliance specialists. Even then, we recognised the need to step beyond immediate media transactions to identify the hidden value in agency rebates. This remains relevant today. It is now generally agreed in the media industry that the nature of trading dynamics is all down to fit-for-purpose client-agency contracts. Contracts aren’t just about the single agency entity or brand, but need to be at agency group level. We set out our recommendations for best practice in transparency in our publication for the U.S. Association of National Advertisers in 2016.

To be fit-for-purpose, advertiser-agency contracts must cover issues including data ownership, audit and data rights, rebates, and transaction cash flows, both open and hidden. Advertisers need to understand whether their media is being bought competitively and what additional value is available to improve or balance this level of competitiveness.

What’s more, in the increasingly complex media trading ecosystem – an environment that has become tarnished and characterised by distrust in recent years – benchmarking performance by using pooled data is a positive way to help restore trust between advertisers and their agencies. The key take-out for advertisers is that, if their agency is willing to share transactional data for pooling, then the agency must want to improve client/agency relations. It also enables advertisers to develop equitable remuneration for their agency, further strengthening this key partnership and creating more sustainable long-term relationships.

  1. Because it is key to getting the fundamentals of media right

Media performance measurement is and always has been about the three fundamentals of advertiser price and quality:

(i) Where are you today? Is the current position competitive?

(ii) Where should you be? Is it competitive enough and how much better could it be?

(iii) How do you get there? What specific actions will achieve required improvements?

 

(i) Where are you today?

To address the first question, advertisers need a meaningful and reliable competitive benchmark to understand the real nature of existing media deals.

Rule number one with discounts and fixed-point comparisons: Media owner rate cards are almost meaningless, created devoid of real pricing dynamics.

You need a pool to do that.

(ii) Where should you be?

The main objective here is a clear understanding of the gap between your buying value and the wider market of your peers represented by the pool. Fixed-point benchmarking, year-on-year, cannot address this gap. In the same way, swimmers comparing their performance only with what they achieved last year and not with other swimmers’ times cannot hope to catch up with world-record times.

Rule number one with volume-related media price markets: Make sure you are receiving the value that you are entitled to as a minimum.

If we look at the gap analysis in those markets that have little or no volume relationship in the pricing delivered, a peer group comparison is even more vital because there are no rules. In the UK, for instance, achievable media pricing is primarily driven by the nature of the client-agency contract as regards agency remuneration, performance-related bonuses, and penalties. Here the agency is both principal in the deals and broker of how value is distributed. To understand this pricing potential and the competitive position of your peers, you need a pool and a good contract.

(iii) How do you get there?

For the third fundamental part of the media performance measurement process, we need to propose a plan of action to deliver tangible improvements in value. This can be as simple as proposing a percentage improvement on current pricing, and a year-on-year benchmark may suffice if we are satisfied with the answers to the ‘Where are we?’ and ‘Where should we be?’ questions.

At issue is the difference between opinion and advice rooted in empirical data versus opinion. A recommendation that proposes a precise improvement number, together with a specific and granular identification of how much improvement with which media owners and channels, is a far more powerful opinion. Considered and measured advice creates significantly more traction with internal stakeholders and agency partners.

Rule number one with value improvement recommendations: Use the best supporting data to generate belief and credibility in what is recommended.

  1. To account for key media market dynamics, such as inflation

Media inflation is often the most important variable when conducting year-on-year performance, whereby agencies undertake to improve clients’ media pricing net of inflation and, in delivering this guarantee, earn bonuses or variable remuneration. This would be acceptable, except for the fact that there is no generally agreed inflation index for media, so clients must take agency assertions on inflation as valid or else appoint media consultants to validate agency claims.

There are three obvious sources of data for checking inflation estimates, all of which are either cheap or cost-free. First, agency estimates; second, estimates sourced from other agencies; and third, the inflation estimates or rate card increases provided year-on-year by media owners.

However we should remind ourselves what a measure of media inflation is: the increase in the cost per standard unit or cost per standard audience unit of media, period-on-period. The key factors of this price variable are actual demand for, and actual supply of, that media unit, year-on-year. There is a precise, calculable inflation price that can be independently derived from a media data pool.

Rule number one with media inflation estimates: Test them against independent empirical data based on real bought net prices paid by the advertisers year-on-year.

In summary

If you’re tempted to abandon or ignore the data pool benchmarking described above in favour of your own internal, year-on-year benchmarking and a touch of consultant fairy dust, ask yourself the questions about your competitive positioning:

  1. Do you know where you are today?
  2. Do you know where you should be?
  3. Do you know how to get there?

Are your answers based on instinct, experience, and opinions, or empirical data and real facts? Pooling is the best way for advertisers to assess the performance of their agency partners clearly and objectively, cutting out opinion, and helping to build trust between them and their partners in the process. It provides hard data to clients based on real, bought campaigns.

What’s more, advertisers who continue to pool their media data benefit both the analysis of their own performance and the accuracy of global media data pools overall. They help to elevate industry standards for media performance benchmarking, to professionalising the service – sharing best-in-class processes – and to ensure transparent methodologies are increasingly baked into the media ecosystem.

The realignment of multimillion-dollar, or multibillion-dollar, media investments requires a significant degree of due diligence and consideration.

And – you know what? – you need a pool to do that.

 

We would like to hear your thoughts on this, please submit your comments below. 

 

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