Media agencies fail to deliver

New research by De Saulles Associates (DSA) reveals that advertisers are not satisfied with the service and cost-effectiveness they receive from media agencies.

Advertisers believe there should be greater transparency regarding agency margins, an element of performance-related pay, and that agencies should learn more about their clients’ businesses.

The media buying market is shrinking as it matures. Larger competitors are merging or acquiring in a bid to increase market share, and are introducing cost-cutting strategies and process efficiencies to meet shareholder demands for growing profitability. DSA wanted to investigate how this process is affecting client service.

DSA asked 300 advertisers – marketing directors, media, advertising and communications directors – questions covering media discounts relative to agency size, service and fee practice.

They were asked whether cost cutting and process-driven efficiencies were being reflected in the service they received, and whether client size determined the agency’s service. Also, did clients believe the critical mass of the agency achieved significant media saving, and did they understand how media discounts were negotiated?

Respondents were divided into three billing groups of &£550k-&£2.5m, &£2.5m-&£5m and &£5m-&£10m.

When advertisers were asked whether the size of an agency affected media discounts, more than half of the small-billing clients – 53.8 per cent – agreed to the importance of scale, while less than one third – 31.8 per cent – of the larger spending group agreed. Forty-six per cent of respondents were reassured by agency size.

The survey also revealed that advertisers would like some help in determining service levels. Two out of three would like to see an objective audit of service levels, and four out of ten believe the agency needs to understand the client’s business better.

Less than half of the clients – 44 per cent – said service is “OK”. Eight out of ten believed service was an important discriminator.

The core message from advertisers with billings of &£2.5m-&£5m is the importance of a bespoke service rather than an off-the-peg one. But, overall, the strongest message related, perhaps predictably, to fee practices. Only 17 per cent of advertisers believe current fee practices are satisfactory.

Eight out of ten clients want to see complete transparency regarding the margins on their business, and 78 per cent want some form of performance-related element.

Nigel Breckon, managing partner of media buying group Jones Britton Breckon Company, says many agencies now segment their service according to a client’s global and local profits importance.

“In many large multinational media networks clients are being segmented into one of four groups,” says Breckon.

The first group consists of clients which are given a premium service because the agency is appointed to a multinational/multimillion pound assignment.

The second group is made up of those given a premium service because they are a high-profile, multimillion-pound national client, often resulting from a pitch contest where a very low fee can only be compensated by some form of service bonus.

Those given a premium service because they represent potential income (normally smaller companies owned by bigger ones from which the agency is striving to gain more business) make up the third group.

Finally, the fourth and largest group, according to Breckon, is particularly important to the bigger agencies as it includes clients which fund the lost margin the agency incurs handling clients from groups one, two and three.

“The agency reduces servicing costs by using junior staff, investing little senior management time, entertaining infrequently – to the lowest level but avoiding a review,” says Breckon.

Generally, clients are unsure which media agency will best meet their needs in a media market polarised between the commodity-driven “sheds”, the old-fashioned high street and the odd boutique. Greater transparency and media service auditing could help resolve their dilemma.