The MFA and AANA pitching guidelines advocate using a trading exercise template.
A glorified Excel for completion by agencies asking for rates, discounts, and CPMs across various media currently used.
For larger domestic and global agency reviews, these can be exhaustive across every medium, covering every eventuality.
Definitive pricing and certainty in trading value is the goal, and numeric comparisons of the responses quickly reveal the agency through whom the media budget will go furthest.
Job done… trading sorted… savings achieved.
Fine in theory. Fails practically.
All fine in theory, but the media pricing template exercise is often misleading and more of a liability than an asset.
The Media Agency buying exercise template has become every agency’s worst nightmare in the real world.
No agency can afford to be trailing the field regarding pricing promises.
Completing the exercise is a guessing game based loosely on the truth.
How low can I feasibly pitch my prices?
How low will my competitors go?
The true pricing at which an agency believes it can trade is very much secondary.
And for good reason…the system plays into the hands of agencies on the outer, fully aware they might not stack up in other areas.
The trading promise is an area where scant proof and substantiation is required.
There’s nothing to lose…a chance to stay in the game, and at worst, you get to ‘poison the well’ and make it uncomfortable for the party that eventually wins. Procurement might force them to improve their offer closer to the rock-bottom rates you’ve introduced.
All too frequently, the numbers will seduce those in purchasing and procurement.
It’s a commitment in writing… and that’s good enough for them.
But it is far from a bankable commitment.
No consequence for the agency.
In recent years, TrinityP3 has been approached by several large Australian-based advertisers who’ve appointed agencies with just such trading commitments key to the selection decision.
Media Agency Reviews in which we weren’t involved.
Lured by discount pricing and promises of 7 figure savings they’ve signed up and now 6 months into the relationship the new agency is falling woefully short of the promised savings.
Why aren’t they delivering? What can we do? What remedial steps do you recommend? And in one instance, the questions asked, Can I take legal action?
Unfortunately for these clients, there is no magic solution.
The options are stark. They have 2 choices:
- Act now – provide the 90 days notice in your contract and return to market (with egg on your face).
- Or if the agency is delivering in other areas – accept the mistake you’ve made on trading and ride out the contract term.
One client approached us to support them in taking legal action against the agency for failure to deliver a massive pool of bonuses and added value. On the surface, they had a strong case with extensive under-delivery of pricing and bonus promises; however, they had failed to read the conditional small print.
They were committed to providing booking approval 13 weeks in advance for all campaigns to deliver added value and bonuses on TV. A quick audit revealed 95% of activity to have fallen short of the requisite lead time. There was no legal recourse.
Put all of this together, and it is clear that the pricing template has now become the riskiest way to evaluate trading ability.
Win the pitch and worry about delivery down the track is too often the approach.
An underperforming agency under pressure to secure a win will do whatever it takes.
The best agencies are never cheap.
In TrinityP3’s experience, the higher-performing agencies will rarely be the cheapest in the trading exercise.
To use the lowest price promise derived from a template for any aspect of agency selection is deeply flawed.
As support to this is feedback from mainstream media owners who have frequently expressed an intense dislike of this exercise.
At the Media Federation summit in 2019, James Warburton (CEO of SevenWest) called out the trading template and its use in pitches as a flawed mechanism that raised unrealistic expectations on pricing.
TrinityP3 strongly advises clients against the inclusion of a trade pricing template but when ruled mandatory by procurement, we ensure it is carefully balanced within other mechanisms far more reliable at determining trading capability and value delivery.
It is time to bid farewell to the trading exercise, and we would urge the AANA and MFA to embrace this within their media pitch guidelines.
A better approach to media value?
We buy better than our competitors has long been the trading mantra of multinational media groups.
Rationales vary by agency and change across time, but all fall within the common themes of:
- Bigger – Size and Scale.
- Smarter – Buying backed by proprietary tools that unmask value.
- Better – Expertise through a trading lead of repute or specialists in individual media streams.
- Alignment with media owners – ‘We are the agency of record’.
- A Client focus that leverages better beyond the group deal.
And increasingly:
- Placement through our specialist ‘stand-alone’ trading division that delivers preferential rates (albeit without transparency)
It’s highly confusing for a client during a pitch.
Their heads are spinning by the end of six credentials sessions with different agencies.
They have a credible and compelling story of why and how they excel in trading.
Does any agency have a clear advantage?
Two things prevent anyone from establishing a clear advantage.
Firstly, every multinational agency and larger independent has some great Independently audited trading results to champion. Secondly, the chart they all include highlights the improvement in trading they have achieved for new clients after winning business from a rival multinational.
Everyone’s a winner.
Collectively the large agencies successfully managed to nullify any advantage they have at an individual level.
Clients see a merry-go-round of wins and advantages over each other.
No agency has lost key accounts where the new agency hasn’t delivered improved value validated by external sources.
Very happy to hear from any agency bullish enough to refute this.
So, what is the truth? Who does trade well? How do TrinityP3 respond to clients when questioned by confused clients?
Well, nobody is making things up.
The wins and audit results presented are all perfectly genuine.
All the large agencies and larger independents can buy well at competitive prices.
And to many in the industry this will come as no surprise, price parity across group deals is nothing new.
Throughout the nineties and early 2000’s when the group deal was everything, they were all within a narrow pricing band.
And that makes eminent sense – given the fluid movement of senior personnel between the multinational groups, why would any sane media owner provide a clear advantage to one agency group?
In no time, they would be forced to provide matching discounts to all the groups and devalue a significant proportion of their inventory.
Media owners cannot benefit from providing tangible trading advantages to any multinational group.
The difference in trading performance
The difference between agencies and the value to clients lies not in the group deal but in the dependability and regularity at which they buy well.
The extent to which they buy well for all their clients, all of the time.
In this regard there is most definitely a significant difference in those who consistently perform well for the full spectrum of their clients and those who only achieve competitive performance for a select group of larger ‘price conscious’ clients.
The 3 critical keys to high-quality trading performance aren’t rocket science. They are:
- Successful translation of strategic imperatives into the trading area. Ensuring you don’t just buy eyeballs but the right audience, mindset, and the most fertile environments to ensure successful communication.
- Well-crafted, upfront negotiation with key media providers
And most importantly
- Diligent campaign management. Campaign schedules today need a high management level and ongoing optimization to optimize efficiency, particularly in digital, where performance can be measured through the campaign in real-time.
‘Set and forget’ and poor campaign management far outweigh any other factor in delivering value. Agency teams in the digital area are often understaffed and overworked. Passive clients who don’t ensure sufficient staffing and demand regular review meetings during campaigns get relegated to the bottom of the list and forfeit significant value.
The keys to trading performance today are less about pricing and numbers, they are people based.
The questions to determine how well an agency will deliver trading value in a pitch for every client are:
- Have you ensured sufficient FTEs in the trading/ analytics area to deliver diligent, attentive campaign management?
- Do they have a high-quality trading lead on my business supported by the agency trading head who will actively negotiate my client deal?
- How well connected are the strategy and trading teams to ensure the richness of the strategic approach loses nothing in translation to the trading area?
- Do they have robust processes and protocols that reflect care and attention in campaign management?
TrinityP3 has established a detailed trading evaluation process that focuses on people-based commitments customized to individual client needs, backed up by proven processes and confirmed within contractual agreements.
Price-specific commitments are often inherent within this but as a part of a detailed package that provides far greater certainty than price points on a trading template.
Contact us to discuss the best way to review agency media value or learn more about our approach to media agency search and selection.
A version of this article appeared in AdNews in two parts in January 2024.
