Agency Business Grapples With Procurement Units

by David Goetzl, Oct 3, 2012, 7:32 PM

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Frustration with client procurement departments interested in driving down fees continues to burn in the ad agency world. A pair of top executives said the austerity ethic is slowing investment in experimentation and research, which would pay off in the long run.

“The client procurement activity barely allows you to make a reasonable rate of return, let alone having sufficient incremental dollars to be able to invest in R&D,” said Miles Nadal, CEO of holding company MDC Partners. 

Nigel Morris, the CEO of Aegis Media Americas and EMEA, said procurement departments have contributed to a lower emphasis on marketing at some companies.

“Procurement has almost taken over in terms of driving down the influence of marketing because it’s become a cost rather an investment,” he said. But he’s hopeful that new research techniques that could better demonstrate advertising effectiveness will help reverse the tide.

Nadal and Morris spoke at MediaPost’s annual Future of Media event on Wednesday in New York.

Subway CMO Tony Pace, who joined them on a panel, said marketing receives heavy emphasis at his company -- as does looking at, well, the future of media.

“If you don’t have some testing and learning going on in the media realm, I think you’re going to be way, way, way behind,” he said.

The lengthy, multi-topic discussion also touched on the future of gaming, where Eric Hirshberg, a top Activision executive, said he expects it to continue to grow, given the increased penetration of smartphones and use of Facebook. Both are helping expand gaming to new demographics and increase usage in some traditionally slower dayparts.

“There’s an opportunity to convert those people into gaming enthusiasts and to turn gaming into the mainstream entertainment that I think it’s become and really amplify it,” he said.

Morris predicted that marketing automation would continue to gain steam, along with an emphasis on data.

“What we are gearing up for is a marketplace for media which is going to become much more automated and going to become much more real-time,” he said. “Data is going to become absolutely critical to the way we are able to [make] decisions to advise our clients how they spend their money. But on the other hand, it is still fundamentally all about people … the understanding of people and how people are changing in this world … how they are connected, how they make decisions.”

Pace said Subway is sort of ho-hum on the emergence of agency trading desks and plans to continue to rely on traditional relationships with media sellers.

“We think there’s going to be more benefit in long-term collaborations with large media partners across the spectrum than we see potential benefit from the trading-desk phenomenon,” he said.

Partnerships allow Subway to have a discussion with a media entity on a current ineffective campaign and work together on a change, Pace said.

 

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