Virtually every week, there is another story about major marketers putting their media agency in review. Most of the reviews these days are driven by price, not performance. Marketers – through their procurement officers – want lower media prices, and they want to pay lower media agency fees. Certainly, marketers and their media agencies also spend a lot of time on media performance, but it seems that the pendulum has swung a bit too far to the cost control side lately.
It’s natural not to want to pay too much for something you buy a lot of. However, I believe that marketers are doing themselves and their companies a big disservice by focusing too much on price, not performance, in the media decisions these days. Here are 11 reasons why:
1. Creates false sense of accomplishment. Taken by itself, cost-cutting can give folks a sense of accomplishment that they may not be due. What seems like printing profits may really be mortgaging the future.
2. Takes focus off cutting waste. Driving down the cost of goods frequently distracts folks from focusing on waste within the goods themselves. We know that there is a lot of waste in media, and paying less for media doesn’t do anything to solve that problem. If anything, it probably does the reverse.
3. Perpetuates imprecision in media measurement. If we only focus on the bulk cost of media – CPMs of sex/age demographically defined Gross Ratings Points, for example – we perpetuate imprecise media measurements and slow down efforts to improve them. We would be better served to get more granular with our data and better understand its performance at the target customer level.
4. Cost-cutting expertise not ticket to CEO job for marketers. CFOs might become CEOs by being great cost-cutters, but not so for marketers. If marketers want to run the company some day, they will need to be armed with performance achievements – driving provable sales growth – just like their product, distribution or sales brethren seeking that job.
5. Misaligns interests with partners. If you want your partners to do amazing things, whether it is media agencies getting their hands on the very best placements or integrations, or your creative shops producing excellent work that excites and inspires, you dont want to compensate them on a bulk cost basis. That doesn’t incentivize them in alignment with your best interests.
6. Improving marketing performance is best way to control destiny. Marketing and advertising performance – customer creation and sales – drives revenue, profits and growth. If you want to control your destiny, creating provable growth is the only way to get there.
7. Cutting costs is not a long-term solution. Cutting costs gets you something in the short-term, but it’s not sustainable over time unless you are working in a market where the supply is outstripping demand, which is not the case for most high-engagement media. This tactic needs to be paired with efforts to improve performance as well.
8. Perpetuates notion that marketing is a cost center, not a profit center. Corporate colleagues all too often perceive marketers as part of a cost center, not a profit center. The best way to dispel that notion is to proactively focus more on proving and improving media performance, not just lower media costs.
9. Focusing too much on lowering CPMs encourages non-transparency (and fraud). We have seen this firsthand in a number of exposes related to the online ad business. Too many folks have been focused on driving down the CPM and CPC prices of online display, and the result has been the rise of robotic traffic and fraud. It wouldnt have happened this way if the focus had been on the true performance of the media.
10. Drives out best talent. Working in a cost-cutting job shop isn’t what inspires many of the best and brightest. They will go where they can create value, not just pay less for it.
11. Won’t win you best industry awards.:)
What do you think? Has the cost-cutting pendulum swung too far in the media business today?
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