Commentary
Marketers Should Focus More On Media Performance, Not Just Price
- by Dave Morgan , Featured Contributor, November 21, 2013
It’s natural not to want to pay too much for something you buy a lot of. However, I believe that marketers are doing themselves and their companies a big disservice by focusing too much on price, not performance, in the media decisions these days. Here are 11 reasons why:
1. Creates false sense of accomplishment. Taken by itself, cost-cutting can give folks a sense of accomplishment that they may not be due. What seems like printing profits may really be mortgaging the future.
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2. Takes focus off cutting waste. Driving down the cost of goods frequently distracts folks from focusing on waste within the goods themselves. We know that there is a lot of waste in media, and paying less for media doesn’t do anything to solve that problem. If anything, it probably does the reverse.
3. Perpetuates imprecision in media measurement. If we only focus on the bulk cost of media -- CPMs of sex/age demographically defined Gross Ratings Points, for example -- we perpetuate imprecise media measurements and slow down efforts to improve them. We would be better served to get more granular with our data and better understand its performance at the target customer level.
4. Cost-cutting expertise not ticket to CEO job for marketers. CFOs might become CEOs by being great cost-cutters, but not so for marketers. If marketers want to run the company some day, they will need to be armed with performance achievements -- driving provable sales growth -- just like their product, distribution or sales brethren seeking that job.
5. Misaligns interests with partners. If you want your partners to do amazing things, whether it is media agencies getting their hands on the very best placements or integrations, or your creative shops producing excellent work that excites and inspires, you don’t want to compensate them on a bulk cost basis. That doesn’t incentivize them in alignment with your best interests.
6. Improving marketing performance is best way to control destiny. Marketing and advertising performance -- customer creation and sales -- drives revenue, profits and growth. If you want to control your destiny, creating provable growth is the only way to get there.
7. Cutting costs is not a long-term solution. Cutting costs gets you something in the short term, but it’s not sustainable over time unless you are working in a market where the supply is outstripping demand, which is not the case for most high-engagement media. This tactic needs to be paired with efforts to improve performance as well.
8. Perpetuates notion that marketing is a cost center, not a profit center. Corporate colleagues all too often perceive marketers as part of a cost center, not a profit center. The best way to dispel that notion is to proactively focus more on proving and improving media performance, not just lower media costs.
9. Focusing too much on lowering CPMs encourages non-transparency (and fraud). We have seen this firsthand in a number of exposes related to the online ad business. Too many folks have been focused on driving down the CPM and CPC prices of online display, and the result has been the rise of robotic traffic and fraud. It wouldn’t have happened this way if the focus had been on the true performance of the media.
10. Drives out best talent. Working in a cost-cutting job shop isn’t what inspires many of the best and brightest. They will go where they can create value, not just pay less for it.
11. Won’t win you best industry awards. :)
What do you think? Has the cost-cutting pendulum swung too far in the media business today?
I've always said when Dave Morgan talks, listen. Great to see this side of the debate well-articulated. There's been a lot of head shaking around here reading about folks tossing out performance in favor of price. We can leverage the machines AND still focus on the value of personal attention to response, optimizing both to achieve sustainable, scalable results.
I'll give you one more: The goal of a marketing program is seldom to just lower costs. Presumably media has a business goal such as driving sales or leads. That is what media should be measured against, i.e. did it drive business? You become what you measure, and if all you are measuring is how cheap something is, you don't spend energy doing the job you are supposed to do.
The good news is that smart marketers, social media managers and PR managers are starting to figure it out. We hope that the decision makers that are only measuring costs will retire or be forced to retire to Jurassic Park sooner rather than later.
Hi Dave, Despite my own belief that
it's never been the media's job to perform, it seems to me that "performance" is already built into the price. For example, according to a recent article on Trefis, the average CPC among the three biggest online ad sellers falls within a narrow trading range -- $.80 on Facebook, $.82 on Google, and $.86 on Yahoo/Bing-- despite wildly different average CTRs (and CPMs) for the same three -- 2% on Google, 0.93% on Yahoo/Bing, and 0.05% on Facebook. This tells me that Google has already set the price and defined performance as whatever it takes to generate a clickthrough, and that media buyers and advertisers have made clickthroughs on Google the coin of the realm. How else do you explain the coincidence in CPCs? This also tells me that media buyers consider the 49 out of 50 impressions that don't generate any clickthroughs on Google to be no more or less valuable than the 107 out of 108 impressions that don't generate any clickthroughs on Yahoo/Bing, or the 1,999 out of 2,000 impressions that don't generate any clickthroughs on Facebook. BTW, did I mention that all three have the exact same audience?
Amen.
Mike, I think that "true" media performance is rarely built into price, since most marketers aren't able to de-average their spend and understand how each and every impression delivery performed for them. That is why folks all-too-often focus on mass price metrics and not provable performance metrics.
Dave, I just calls 'em as I sees 'em. My point is that those impressions that come and go by the thousands between actual clicks have no measurable performance value whatsoever, hence the same average CPCs for Google, Yahoo and Facebook. In other words, if the CPCs on the big three are virtually identical, and yet their CTRs vary widely, it can only mean that no performance value is being assigned to the impressions that don't produce clicks. Do the math, Dave. An $.80 clickthrough on Facebook with a .05% CTR yields a single impression "cost" of four hundredths of a cent. Exactly which performance metrics are you using to prove the value there. The clickthrough is the only pure performance metric ever conceived, even if they do cost over eight hundred bucks per thousand across the board.
My impression is that our clients are totally focused on performance. Of course, it helps that they can see performance in real-time.
I think many experienced marketers grew up in the business at a time when media would almost always perform, and media had disproportionate pricing power: "you want to reach customers, you gotta go through us." The new digital laws of supply and demand have flipped things. We can no longer be nearly as certain that media will perform, and most of media has lost its pricing power. Beating up media over costs today IS counterproductive. "What's cheaper?" is now a fundamentally less useful question than "what works?"
Tom, that time you recall when media would almost always perform was merely the lack of clutter letting the message through. We've now overstocked the pond to the point where none of the fish can breathe, and we've grown tired of watching them die. But to think the media in some way actually performs -- or ever did for that matter -- is to play right into the hands of the legions of digerati hell bent on measuring all the wrong things.
@Pete et al, "Performance in real time" is the textbook definition of a clickthrough. But it's the message that induces the click (performance), not the medium.
Damn, you nailed it, Dave. Thanks for the great list and thoughts.
What I find confusing, and disappointing is how often creative is not a part of this discussion of "performance." There are no such things as efficiencies if creative is terrible. I cannot tell you how many times I have death with a buyer who didn't know what the creative execution would look like, yet they wanted an amazing, out of the box, never been done before idea. Or I would have a buyer complaining about performance needing to optimize, yet ignored the fact that they had been running the same creative for 4 months.
Creative execution and messaging needs to be a bigger part of this discussion. Great creative gets noticed and great creative gets shared and great creative increases efficiencies. Let's make it part of the discussion.
You're very welcome Michael. I'm convinced that we have to reverse the cycle the industry is in with this ruthless focus on bulk media pricing rather than trying to make it work better.
Mike, I was client-side for a decade. I saw all the numbers for every medium. Almost any advertising -- even bad, stupid advertising -- lifted the numbers. Great advertising made the sales line jump like it was hit with a cattle prod. Media did and does perform and the message helps determine how well. The new challenge is that affordable mass reach is slowly disappearing as digital drives unprecedented levels of fragmentation. The more we maximize our downward pressure on media costs, the faster that we will see affordable mass reach disappear. Pushing the lid down on costs too hard is unwise. But because business suffers from chronic short-termism, I doubt the industry will heed Dave's sound advice. Human nature tends to push things until they break.
Tom, I agree with you, it's broken. But what you've just described proves my point: The media is only the messenger, and we shouldn't shoot the messenger just because we don't want or like the message. In fact, this back and forth between us is a good case in point. MediaPost will publish lots of articles today, all presumably reaching the same audience. Why is it that this article (like the one last week that we both participated in) generates so many comments while others go begging for attention? I'll tell you why: It's because of the relative quality of the dialogue here -- the message, if you will. And it began by me calling Dave's baby ugly, which induced others to chime in who otherwise might not have. It's called engagement, and at this point is has nothing to do with Media Post per se. Go over to the RTB board and see how few have the guts to risk/defend their viewpoint in the open marketplace. I can understand why no one would want to hitch his wagon to a dead horse, but that again merely proves my point that it's the message that performs, not the media. And by the way, affordable mass audience reach is not only still possible online, it's the perfect medium for it -- a claim I will be happy to prove to anyone who contacts me off-list.
Dave, Didn't really mean to call your baby ugly, because you're absolutely right, more emphasis should be placed on value and performance vs. price. We just have different ideas on how to attain that goal. But it's always nice to debate the core issues that challenge us all.
Mike, Nice analysis on the numbers between Facebook, Yahoo!, and Google. I find it depressing that "no performance value is being assigned to the impressions that don't produce clicks." It seems true, but why can't we get past clicks when views are such a well documented part of the path to conversion? Consumers tell us, and attribution systems verify, that the fat half of conversions do not come through clicks.
The root of the pricing squeeze is the myth of buying clout. This became in vogue when buyers teamed up and decided that more money in the marketplace at once was the way to go. They de-coupled media and creative. Now that we can no longer buy huge reach, the big buying agencies are becoming irrelevant. So they keep cutting costs to sustain relevancy. It's a circular death spiral. The only way to change the marketplace is to stop buying reach the way the big media sell it to the big buyers. Clout is irrelevant in buying audiences. Buying audiences performs better than buying cheap bulk. When you buy audience, the message performs better when it is matched to the audience. When we re-link media planning/buying together with relevant messaging (creative), the ads "perform" best. When following the logic, the finger points to the massive media buying firms enabling the "old media" approach to selling. Its not a coincidence that big media buyers don't buy audiences. They can't show a price savings, they can't flex their irrelevant relevancy.
Joe, I agree about the circular death spiral. If it continues, it will be devastating for both media buyers and media owners. Fortunately, I believe that as marketers find more success embracing audience-based programs, and gain provable sales, market share and profits as a result, we'll see most of their competition - and ad eco-system - eventually jump on the bandwagon too.
As an industry, lets stop torturing internet display advertising and take aim at Television and Paid Search--which is where the money is. You can't click on a TV ad and you don't get branding from Paid Search.