If PHD regains Sainsbury’s media account, it will represent a boon for agency futures
A recent article from the FT cited Sir Martin Sorrell calling out fierce cost-cutting by clients and growing pressure from activist investors for short-term returns which, alongside technological disruption, he stated, is a “perfect storm”.
There’s no denying that this scenario is being played out across our industry. The past two years have seen some of the world’s largest media accounts up for pitch, alongside calls for greater transparency, and an increased focus on issues such as brand safety and measurement. Higher quality media buys are clearly in demand, but we’re all aware that there’s a race to the bottom when it comes to pricing.
This situation is a symptom of two broader problems our industry faces. First and foremost digital media is driving short-termism. Impressions, hailed as evidence of an ad view, have become the metric du jour. Data makes every action trackable and measurable – it’s given us an obsession with measuring media back to direct sales, ensuring that we forget the bigger picture: building a brand. In fact, recent research by Enders and Magnetic shows that 80% of chief executives would decline to invest in innovation if it meant missing one quarter of earnings results.
The second problem is the commoditisation of media buying. Reading the trade media in recent years should give us a good sense of how low trust in agencies is. Similarly much has been written about the impact of procurement-led pitches and e-auctions. The same Enders and Magnetic research revealed that in 2016, 91% of advertisers formally involved procurement in their agency decisions, up from 51% in 2003. At face value then, loyalty and trust is at an all-time low, resulting in knee-jerk price reductions, and so media agency days are numbered.
But that’s not entirely the case. I’ll agree that media agencies can no longer exist in their current form, but that doesn’t spell their end – and if PHD regains Sainsbury’s [the business was awarded to rival agency rival agency M/SIX four months ago, before the result was contested] it’ll be a light at the end of the tunnel for those who believe the naysayers.
Here’s why. Where agencies will differentiate themselves is in being business partners to their clients – and after 22 years on that business you can bet on PHD being exactly that. Having worked at the agency ahead of joining MC&C last year I know that there are people there that have put their lifeblood and a couple of decades into that client, and so I’m doubly pleased to see that there is a U-turn on the horizon.
Put simply, high-level business consulting has to be the new string to the media agency bow if we want to do more than keep our heads above water. Doing so also elevates the position of the marketing function in the boardroom, as media spend is a risk for brands and we have to start making that clearer when we speak to the C-suite.
Looking at it objectively, marketers are challenged to optimise how a business should invest money to retain and attract new customers, with all these investment decisions based on the business’ wider objectives and budgets, as well as a projection on short-term market and economic trends.
A failure to model the market correctly fundamentally exposes businesses to considerable risk given the lack of guarantees in marketing. An over-investment may lead to a business finding itself over-committed to the wrong marketing plan and short of cash, while an under-investment may hand the advantage to rival firms, losing market share.
When it comes to modelling a business with the scale and heritage of Sainsbury’s, the ultimate goal is to deliver profitable, sustainable growth. However, supermarkets are hugely vulnerable to disruption, competitive pricing and economic trends. Knowing that business inside out, therefore, is a huge advantage for any media agency looking to operate in that higher level consulting space, and for the brand as a result.
So as discussions continue I can only hope that a decision is made that signals clients valuing their media agencies as business partners above all else. Ultimately, media is a serious investment and I’d always advocate for brands choosing a partner that wants to hold their hand through the process, and work alongside them to deliver growth to their business.
Mark Jackson is managing director at MC&C