Cost Isn’t Value

I read something this morning which I find to be disturbing. It’s a quote from Michael Roth, the Chairman of Interpublic. I’ll get to the quote in a second but the reason why I find it disturbing is that it reveals a fundamental flaw in the media world. It’s not something that’s new but it has had a negative impact for many years and that impact is only increasing.

Mr. Roth was quoted as follows by MediaPost:

“Media buying is basically efficiencies and costs,” Roth said,  “If you can prove that you can buy more efficiently than somebody else, that’s how you’re going to win the business.

“The buying business has become much more commoditized,” he emphasized, “and when you’re dealing with any commodity, the key component of that is are you getting the better price. If there’s a competitor out there that can provide a better price, then quite frankly, we don’t get the business.”

He was speaking at the UBS Media Week conference and he’s not wrong.  And that’s the problem.  Cost isn’t value  – buying media at a lower CPM may not yield the same results if media are selected strictly on that basis.  30 years ago, when there were hundreds of fewer choices for the media buyer, time was taken to evaluate factors beyond the CPM.  Environment, merchandising, and a lot of other factors, including the faith one had in one’s salesperson to deliver what was purchased and maybe even more, all weighed on the buy.

Not today.  One fills in the spreadsheet and submits.  The system cripples buyers’ abilities to provide more value if the cost as measured by CPM is too high.  And that’s wrong.  To Mr. Roth’s point- if all you’re doing is having the agency execute what’s on the media plan without a ton of thought, why do you need the agency?  They’re better than that and they can be great strategic thinkers who can provide opportunistic values since they’re immersed in this every day.  But not if they’re wearing blinders forced on them by a commodity mindset about both media and media buying.

If you’re a marketer, talk with your agency about this.  The end result you want is an effective buy – one that moves product, not a “cheap” buy that looks good on a spreadsheet but doesn’t impact sales.  I know that’s pretty obvious, but if it’s so obvious in theory why isn’t it happening in practice?

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Filed under Consulting, digital media, Reality checks

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