I was recently asked about how to counter a price objection from a small advertiser. I spend a lot of time in rooms with groups of salespeople helping them think about ways to fight the sales fight in the toughest environment I have ever known. Of course the price objection happens across the board; from big and small advertisers and in the business-to-business market as well as consumer market. There are so many choices for advertisers, and there seems to be a whole new media category every year; location-based social marketing, anyone?
How can a digital salesperson counter the objection that the buyer can buy around her property? Customers with price objections have been around since the biblical flood, but buyers have never had more alternatives than today.
Publishers of high quality content seek to hold the line on advertising pricing, while blog networks and aggregators offer lower pricing and advertising networks and social media offer even lower pricing and extravagant claims for reach.
For years owners of premium broadcast content like sports and hit TV shows have successfully maintained their status and both their larger audiences and their higher costs per thousand (CPMs), while advertisers had the opportunity to buy around them. Can we learn anything from them? While broadcast and cable alternatives multiplied, ad prices for hit shows went only one way: up. We went from three networks to five, and from a dozen cable channels to hundreds, but it wasn't until the near-economic melt-down following the housing bubble that TV pricing took a hit.
Why have owners of top TV content been able to hold the line and demand an advertising premium? Traditional advertisers can buy television advertising at very low CPMs across networks and cable networks. They can even buy around the Super Bowl. But these same advertisers spend top dollar to buy prime time or other special event programming. Whether it is the Super Bowl or "60 Minutes" or "Mad Men," the best quality demands serious premium CPMs because the broadcast industry believes in their own value proposition and they have learned how to negotiate.
Readers and viewers are aware of the quality and value of the content they consume and they attribute more trust -- if unconsciously -- to the advertisers in those environments. We know this instinctively, but the Online Publishers Association published research to back it up last June: "A Sense of Place" compared branded environments to portals and social media sites. The research conducted by Harris Associates finds that "Sites with trusted content correlate strongly with the sites' advertisers being perceived as reputable."
And because we are known by the company we keep, advertisers know (but sometimes need to be reminded) that they too are known by the company they keep. This is the second supporting value for premium pricing in first-class online media environments. When I started in sales in magazines, the first thing a prospect would do was open the magazine and page through it to see who else was advertising. They knew they were going to be judged by the company they kept. This is what also explains why Vogue can still publish a telephone-book-sized September issue. The advertisers want to be associated with their peers. And for good reason. That is why Mercedes will be interested if they see Tiffany advertising, and it's why Estee Lauder will be interested if they see Donna Karan advertising in a particular property.
Only one part of the solution for supporting quality media environments is in the research or the logic. Even more important is the matter of a self-confidence that sellers need to build for themselves. While it's true that advertisers have more alternatives than ever before, it is also true that online salespeople have more prospects than ever before. Salespeople need to develop their territories and their prospect lists with this in mind. Hanging their hopes on a few "good" prospects is a formula for disappointment. A salesperson doesn't have to say yes to a price concession demand from the person in front of them unless they have no other alternatives. If they have lots of prospects, salespeople will know that they will find another buyer.
Smart media companies like ESPN and TBS made the decision a few years ago to eliminate the ad-network ads from their sites. Yes, that made it harder to fill unsold inventory, but it eliminated the buyers who were trying to buy the brand without paying the price. The best consumers still want the best content. And the value of that content and its environment is there -- only if sales people can explain how the value is delivered, and sales management demands it.
I've long held that purchasing anything relies on 3 main points (in no particular order):
3. Ease of Use
There is a good reason why TV has remained the largest portion of revenue spend - ease of use. It's relatively simple to make the purchases, the quality is (generally) good, though the price sometimes may seem too high it's always negotiable and something can be worked out.
Other factors do come into play when making purchases, though they tend to be related to particular situations and are not endemic to the market at large. Things like personal preferences, loyalty to brand, and testing. Each one of these will come into play, but usually with considerations from the original 3 points.
TV's CPMs will continue to grow mainly because of the ease of use factor and the knowledge that you more or less have a good idea what you're getting for your purchase.
Digital will continue to grow because of its sheer size and ability to implement new technologies and ideas. But at some point, the difficulties of large scale purchase undermine the value of trying to "buy around" good content. Extremely good quality from premium sites represent a known – and there is value in knowing what you’re buying. While you can do hours of research and find other sites where these same eyeballs may be purchased for a lower CPM, then other questions come into play:
1. Is the quality as good – is the environment correct?
2. Does the cost differential make up for the extra effort in seeking out these placements?
3. Is the purchase process going to be more difficult by expanding beyond what I know, thereby making a lower CPM more difficult to implement?
As well as many other questions. The lower visible costs in CPM may be offset by relatively unknown or unseen costs related to the purchase and management of it.
Two stories along this line:
1. When approached by a person seeking to buy AOL property in its heyday, I was asked “Why should I pay so much for this, when impressions on the internet are infinite?” My response was simple. “Infinite impressions imply no cost at all – you should be able to get them for free if they were. Seemingly unlimited impressions imply lower costs – but you take a chance with what you get. Knowing what you’re purchasing, the environment and the people you are seeking to reach, is worth far more than trying to lower your costs by purchasing impressions just because they are sold at a cheaper price.”
2. Prior to that, I was working at a now highly visible cable network with a low sellout level. We used price to leverage ourselves into many deals, but hadn’t hit the “big time” yet with any name brand high visibility clients. One day, two deals which amounted to about 5% of our annual estimated budget were placed on my desk. The CPMs were terribly low. After reviewing them, I recommended allowing the sale, though they were detrimental to our pricing goals. Management at the time was reluctant and asked me to justify my position. I stated that the two clients were high visibility, with major competitors who would likely show up at some point and want similar placements after seeing these on the air. While the short term deal was not helping us, it wouldn’t hurt too much AND could provide an impetus for activity from other clients we’d never seen before. Sure enough, within 3 months, the other competitors were placing orders that were larger and at much higher CPMs. There is a time and place for using price to leverage opportunity – and then there is a time and a place to shift motivations.
Both these stories, in somewhat different media arenas at different stages of development, make a point, though. Price is both a guide of value and a standard of measurement. If there are other more valuable aspects to the purchase, then price doesn't have to be the only or even the final consideration.
I think its interesting when a buyer tells me that they are 'going with ad networks' as an over-arching strategy.
Mainly that response comes from an over-fixation on targeting (left-handed small business owners with green eyes) and price ($1 cpm??).
I think its the agency's job to redirect clients who get caught up in targeting (or vice versa, the client re-directing the agency) and forget the golden rule of building your foundation in trusted environments.
It is my opinion that there should never just be a strategy of ad networks for a brand trying to build customers and a reputation. But that linear thinking (as if you must make a choice between ad networks or publisher direct) is fairly prevalent.