February 9, 2012
As consumer confidence remains sluggish, advertisers are increasingly interested in understanding how effective their media agency is negotiating. This raises two main concerns:
1. What are the issues affecting negotiation effectiveness?
2. How effective are the advertiser and agency in achieving additional cost efficiencies during each campaign?
With most communication strategies based on exhaustive consumer analysis and insights from a plethora of syndicated and bespoke research, a clear understanding of your target’s ‘media imperatives’ is one of the most powerful negotiating tools available.
Understanding how to reach a ‘light TV viewer’ who is also a ‘heavy on-line reader’ might seem obvious, but the essential communication elements of your particular product or service may dictate otherwise.
On one hand, using TV to try and reach consumers who don’t watch much can be inefficient and expensive. On the other hand, trying to explain a complex visual scenario on radio just because your targets listen a lot can be just as ineffective.
Getting the media mix right and the balance between effective and efficient communication channels – both between and within your chosen selection – can have a marked effect on the ability to leverage spend during the negotiating and buying process through more effective channelling of budget.
Is bigger better?
In media negotiating terms, size does count. And not just how big your budget is but also how much clout your media buying agency has overall.
In the typically ‘three-tiered’ process that makes up most major media negotiations, the media agency (or buying group) size sets the first discount off base rate (usually known as the ‘ceiling’ for agency-based advertisers).
Your individual spending volume then comes into play, as the client-specific discount structures are set based on volume or share.
Finally, the actual rate paid on a campaign by campaign basis is the result of the leverage your buying team can exercise on top of these first two discount levels in the context of the current market conditions, lead times, placement strategies and a range of other variables.
One lump or two?
Naturally, negotiating strategy can play a big part in the rate base outcome. One, two or three networks in your TV negotiation? Two contracted and a float? Specific target, specific need – one network? Newspapers by masthead or by publisher? Magazines likewise? Do you know your high, low and walk away positions?
Having an agreed negotiating strategy, the courage to stick to it and a good team in support can make all the difference between a great outcome and a bad feeling in the pit of your gut. And remember, in any negotiation, the best result is a win:win!
The power of process
Even with the best team, a great strategy and terrific leverage, the best laid plans can go astray if the basic process rules are forgotten. These rules apply at the macro (doing the annual deal) and micro (campaign by campaign buying) levels.
1. Give the agency and yourself time.
Negotiations don’t need to be protracted but you will need breathing space so both sides can properly consider their positions and come back with well thought out counter offers along the way. Time is particularly critical in the campaign negotiation/buying process where the best spots and/or positions are always the first to go. In the seller’s market that has characterised conditions over the last couple of years, there have been no prizes for coming in late!
2. Make sure the brief is clear, concise and based on as much factual information as possible.
Basic factors like timing, seasonality, distribution and geography are obvious factors in ensuring the negotiation is based on your business plan. Of course, critical factors like target audience are essential elements that must be spot on or you’ll end up wasting your money despite the best of intentions.
3. Make sure that both you and the agency understand and agree what your expectations, goals and objectives are for the negotiation.
Many times, the agency comes back thinking they’ve done a great job, only to find that the client’s expectations were based on issues only partly communicated and understood.
This brief review only scratches the surface of rate negotiation effectiveness. We have been providing advertisers with a benchmark report on how their negotiated media rate compares to the industry rate across the main media for the past ten years. But more importantly we benchmark how effective you and the agency are in capitalising on this rate as it is applied to your campaign activity.