Media is cheaper but ad spend remains essential

It’s never been a better time to be a retail marketer. As media companies battle with a lack of demand, the deals on offer to retailers for outdoor, broadcast and print advertising are better than ever. BrightHouse head of marketing Alan Beesley says: “I have 15 or 20 calls a week from outdoor and media agencies offering me 90 per cent off rate card.”

The deflation in the media market began to accelerate around autumn last year, and House of Fraser brand director Matt Chambers says it has “really started to take hold in the first half of 2009”. Current estimates from the department store retailer’s media agency Starcom MediaVest put the overall market down by up to 20 per cent, but the extent of the fall depends to a certain extent on the media channel in question.

MediaCom Worldwide chairman and chief executive Stephen Allan said at the end of last year: “With total ad revenues falling in 2009, all categories of media will share the pain, with regional newspapers suffering the most and the internet the least.” TV and outdoor advertising are also among the worst hit. Darren Reubin, managing director of media agency PHD – which counts Sainsbury’s among its clients – says: “In terms of TV, I’ve never known a market like it. We’re talking about TV costs that compare to the early 1980s.”

Costs are also falling significantly in online display media. Josh Krichefski, deputy managing director of BLM Quantum, whose retail clients include T-Mobile, says they are down at least 15 per cent year on year. “It’s happening as clients pull back budgets and focus more on direct return on investment,” he says. “The online direct response channels such as paid search and affiliate marketing are reaping
the benefits.”

BrightHouse is just one of countless retailers that is benefiting from the general deflation in media costs. Last week it announced its latest TV sponsorship deal for Australian soap Home and Away. Although Beesley won’t disclose the sum the rent-to-buy specialist retailer has paid, it is evident that it has walked away more than happy with the deal. He says: “A couple of years ago it was: ‘Take it or leave it,’ but now media companies just want certainty. A lot of people have been delaying their decisions when it comes to advertising so it becomes very difficult for the media agencies to plan.”

And sponsorship deals, he adds, are the perfect way to provide that much-needed certainty. “We’ve created a model whereby we’ve given those media owners certainty in relationship to sponsorship and more clarity in relation to ad relevance. For the next 12 months we’re able to talk about a figure.”

But Beesley is also more than aware of the need to view this deal in context. “Judge each deal in isolation,” he warns. It is sage advice. Retailers are being bombarded with unprecedented offers of cheap media but that shouldn’t be a cue to throw caution to the wind.

Beware of the bargain

Everybody loves a good deal. Logically, retail marketing teams should know that better than most – they are the ones who are spending their days devising ways to lure cost-conscious shoppers. But it is easy for even them to be blinded when they receive calls from media companies offering prices that seem too good to be true. Effectiveness remains key. 

Dreams chief operating office Greg Suthern says: “Falling media costs are a double-edged sword. People will buy things now that they wouldn’t even have looked at six or 12 months ago.” He adds: “There are bargains to be had, but you just need to be careful that you’re still getting value. You can buy it more cheaply but if it’s less effective and no one else wants it, there’s not much point.”

While, for instance, the cost of outdoor media may have fallen, that is not to say that all deals within this channel are cheap. Companies’ marketing budgets might have been slashed, but they are not non-existent and people still want to advertise, so those prime outdoor slots that are most visible will still be in demand. If someone is offering what looks like an amazing deal on outdoor space, there will be a very good reason why.

The same principle applies across all media channels. Suthern says: “There are some cracking deals on TV, but are they really worth it?” The bargains are most likely to apply to off-peak ad slots or ad breaks at the end of the programme, when half the viewers wander off to make a cup of tea.

And although Beesley suggests that BrightHouse was able to secure a better sponsorship deal because of the struggling media sector, this doesn’t necessarily mean the most effective opportunities are going to come cheap. Dreams is a fan of the sponsorship route, having put its name to programmes including Piers Morgan’s Life Stories and Mumbai Calling. Suthern says: “If it’s a good programme and there are lots of people watching it, there are lots of people who are willing to pay for it.”

He adds that retailers should not be fooled into thinking that cheap sponsorship deals will deliver the kind of sales that pay back the cost of the sponsorship overnight. “Short bursts of sponsorship are quickly forgotten. It all goes back to the importance of having a sound strategy.”

Faced with a plethora of remarkable media discounts, it is easy for retailers to lose sight of their marketing strategy. The first question they must ask themselves is whether the rate they are being offered is credible. As Chambers warns: “There are cheap deals to be had – particularly in outdoor and TV – but this must not be at the expense of your communications strategy.” He adds that as high street shoppers become more prudent, retailers need to work even harder to create relevant and compelling messages: “This means understanding your audience’s media habits and key touch points – not just buying the cheapest cost per thousand available,” says Chambers.

Beesley adds: “You can end up doing lots of peripheral things because the deal looks so good, but not actually thinking about whether it’s going to work.” He points to taxi advertising as an example. The effectiveness of this media channel is particularly difficult to measure and is therefore cheaper than ever at the moment. “Stick to channels that have worked for you in the past. When it comes to marketing, there are always going to be things you drop and new things you try every year, but the core tends to be the same,” he says.

The sheer volume of cheap media also means that retailers are tempted to try and either increase their marketing spend in specific channels or attempt to gain approval for an overall increase in their marketing budget. This also requires careful thought.

As Reubin says: “If all retailers simply start spending more, their share of voice remains the same. It’s about thinking strategically.”

Suthern adds: “Are consumers going to respond more just because you spend more? We can all think of businesses with big marketing budgets that aren’t around any more. Having the loudest voice doesn’t necessarily mean you’re thriving. If you think you can spend your way out of poor performance you’ll come unstuck. The customer proposition and customer service needs to be right too.”

Maintaining relationships

At the moment, retailers are calling the shots and they need to be careful not to abuse the relationship between them and their media agencies. As with any supplier, retailers are increasingly asking them for better terms despite being offered better deals.

Paul Phillips, managing director of AAR, a client/agency relations consultancy, says: “They can push it too far. If you’re asking the agency to shave costs by say 20 per cent, the reality is something has to give. 20 per cent is not shaving but major surgery, that results in a loss of quality or service that will impact on the client.”

When faced with such demands, the agency will have to tailor their service in response to the lower fees. “Over time it becomes a less profitable business,” says Phillips. That great brand director that was so good at coming up with creative media solutions gets moved elsewhere to concentrate on new business. Those two first-class planners that were working on your account have been reduced to one. Phillips adds: “In the long term, the client ultimately loses out.”

Trying to take advantage of any media company will only come back to haunt you. Suthern says: “If you work with agencies and they understand what you want, then great; they will look after you when things look up. If you’re going to look to make a quick buck, you will not exactly end up flavour of the month when there’s demand over supply.”

In order for a media campaign to have maximum effect, media agencies must focus on far more than just price. It requires an individual, tailored approach, but at the moment the incentive for them to do so just isn’t there.

Krichefski says that in the online and digital space, BLM Quantum is looking at shared risk models, which place an onus on media owners to deliver results for clients. “It means that media owners are being forced to look at cost per acquisition deals or revenue share models,” he explains.

Phillips urges retailers to consider performance-related pay agreements across all of their media channels, so the agency’s pay is based on the success of a particular campaign. “Performance-related pay should focus on the agency’s ability to affect the client’s business performance. They in turn will be more proactive in coming up with ideas and in taking advantage of the most cost-effective media opportunities,” he says.

At the very least, Phillips recommends taking a step back. Asking for sensible cuts is not unreasonable, but it is important to review this regularly in order to plan for the upturn and “be ahead of the curve”. Moreover, that upturn might happen sooner than retailers expect – the Advertising Association forecasts the UK ad market will start to see the first signs of recovery as early as this year.

Just like in property, the abundance of amazing deals shouldn’t be a prompt for retailers to spend money on marketing that doesn’t deliver. But nevertheless, the availability of advertising at unprecedented rates is at least one positive to come out of this brutal recession.