On every continent, businesses are operating in an environment of financial uncertainty. Pressures are coming from all directions – and marketers are facing the consequences.
When each department of an organisation is operating under financial pressure, it’s only prudent to assess every pound, euro or dollar of your marketing spend. Advertisers are being tasked with cost-cutting, and media budgets are an obvious starting point.
But how do you reduce advertising media costs without reducing the quality of service provided by your media agency? The risks are high. Well-meaning decisions can easily backfire and negatively impact your overall media performance – especially when they are made by people who aren’t media specialists.
The world’s top advertisers successfully reduce media costs by working with experienced media consultants. This gives them the knowledge and insight they need to make decisions with confidence. In this article, we’ll use our years of consulting expertise to explain how you can start to cut your media advertising budget without hurting your overall performance.
First, we need to understand the dangers
In any field, operating in ignorance is never a good idea. Doing so always leaves you open to the potential of doing more harm than good with any decision you make.
In media, it is not hard for things to start to go wrong. So without specific insight, you can easily reduce the performance of your advertising campaigns. This is NOT the aim. The aim – in every case – is to reduce your spend without impacting your media performance.
And while this may sound like an impossible task, it is perfectly achievable. All you need to know is how media is traded. This is the knowledge that can help you secure true media savings, rather than simply buying cheaper and less effective media.
Put your focus in the right areas
Most marketers without specialist media knowledge make the same mistake when they are trying to reduce their media spend. Instinctively – and understandably – they focus on trying to reduce their media agency remuneration. But this is a misplaced effort. Instead, they should focus on two other areas that offer much greater potential media savings: media prices and AVBs. Here’s why:
In a typical media budget of €1m, only 10% of that might be attributed to non-working media (i.e. agency remuneration). So that leaves the marketer looking for reductions in a €100,000 spend. Let’s assume they are successful, and they negotiate a 20% reduction in agency remuneration. Overall, they have negotiated savings of €20,000.
However, the working media element of that original €1m budget might be €900,000. If you can secure a 20% reduction in media prices, you would achieve savings of €180,000 – nine times more than the media savings available for the same size reduction in the non-working media budget.
This is not unrealistic. In some markets, the extent of media price variation for exactly the same media inventory can be +/- 70%. Advertisers should always ensure they are benchmarking their media prices, so they can understand how competitive they are against the market average and if there are savings to be had.
Alongside media price variation, marketers should also be sure to optimise the agency volume benefits (AVBs) that are included in the contract with their media agency. Getting full transparency over AVBs is a major win in the battle to reduce your media advertising budget without hurting your performance.
Make sure you maintain the same quality media
When media agencies face client requests for media cost reductions, they often respond by offering cheaper media. This may look attractive to inexperienced clients. What’s better than saving money, right?
The problem is that the media being offered is cheaper for a reason. It is of poorer quality, and therefore going to be less effective.
If you are offered cheaper media, check:
- Is this the same media at a discounted price?
- Or is this different (i.e. lower quality) media priced at a lower level precisely because it is lower quality?
This is an important distinction to understand, and arming yourself with knowledge about this practice can prevent you from inadvertently agreeing to something that doesn’t serve your interests.
Ensure you have media cost and quality guarantees in your agency contract
Making sure your media agency relationship is governed by a best-in-class contract is critical for your short-, medium- and long-term success. Part of what makes an excellent contract so compelling is the inclusion of cost and quality guarantees about your media. Because without these, you are operating in the dark. You simply cannot accurately understand any media savings garnered from a renegotiation.
As part of this, you should also ensure a performance-related incentivisation programme (PRIP) is embedded in your contract. This can be sold to the agency as a way of incentivising them to deliver over and above its promises (it’s better to pay an agency bonus than pay for more lower-quality media).
Crucially, though, you must make sure the PRIP scheme works as a guarantee to ensure the agency does deliver on its promises. This is where having a malus mechanism (i.e. a penalty that punishes poor media spend) in place is essential. Having both bonus and malus mechanisms guarantees that you receive your promised media savings, either through the agency delivering on its promises or on the agency’s remuneration being reduced as a result of it not delivering on its promises.
How a media consultant can help
Experienced media consultants have the power to transform your media budget and its effectiveness. With specialist knowledge, industry experience and proven track records, the best operators have the ability to see crucial gaps in your media agency contract. They can advise on where a contract can be renegotiated to your benefit or, if you are at the start of your pitch process, how best to structure your contract to ensure you have a best-in-class agreement in place from the start of the relationship with your new agency.
Combined, these skills and abilities enable you to reduce your media budget costs while simultaneously maintaining your media agency relationships. In 2021, for example, Abintus managed to identify 31% savings across a client list that includes the likes of Kao Corporation and Pernod Ricard. We also helped 79% of our clients achieve at least a 10% gain in media performance. Stage Entertainment can vouch for our abilities here.
That’s why we mean it when we say media consultants aren’t just here to be cost-cutters. A good media consultant brings genuine value into the media agency management relationship and can help you achieve your financial and performance goals for many years to come.
If you’re looking for ways to reduce your media budget, it’s essential that you don’t go into the process blind. You risk more damage than good. You must arm yourself with the knowledge you need to ensure you are not agreeing to something that is actually counter to your interests.
As a starting point, contact us today and claim a free media agency contract review. We look forward to hearing from you.