You can’t compete on price alone: column

Bell Media's Stuart Garvie calls out clients who change agencies to push down prices.

By: Stuart Garvie, president, media sales and marketing, Bell Media

Recently I was in New York meeting with a number of other broadcasters and media agencies from across North America and one subject that kept coming up was the continual expectation by clients/advertisers that when they change their agency representation that new agency will be able to purchase the same media for less money. The stuartGarvieprocess has become a numbers game with no winners.

Before I was the president of sales at Bell Media, I spent nearly two decades working at media agencies and client businesses both in the U.K. and Canada, which I think gives me some insight into this whole mess. And as a guy who has been on both sides of this divide, I’d like to raise a big red flag: this continual commoditization is a huge threat to media companies and advertising agencies, and we need to come up with a strategy to combat it. The price war we’re witnessing (and in which we’re all involved at some level) is not helping anyone, especially not our clients.

From a media perspective, prices aren’t getting cheaper. In fact, content costs are rising. There isn’t an endless well of media value out there waiting to be procured. So where is this perceived promised value coming from? Well, clients across the country and around the globe are looking for lower media prices, and to get it (or the promise of it) they change media agencies – picking the one that promises to get them the same or better media for cheaper.
Often major agency reviews focus on saving money. We’ve bred clients into thinking that if they pitch their business every three years they will get cheaper pricing. And the competitive nature of the marketplace means that, frequently, media agencies agree to pricing that doesn’t make sense just to win accounts – driving them into commoditized cost-based contracts.

But in reality, it’s just a huge distraction from actually selling products. Clients put far too much time and effort into the representation of advertising rather than just doing the actual job. Let’s face it – we’re not going to give you a better rate because you got a new agency. Why would we? TV is the most noticed and influential medium and we know it works!

Because the reduced rates don’t actually exist, the agency has to achieve the cheaper CPM by changing the media mix, but that isn’t getting a better price – it’s just buying cheaper stuff. And the cheaper stuff typically reaches fewer people in less engaging environments, which almost always affects business outcomes. So, changing your agency solely to get you a better deal on your media rates yields no real rewards. The only thing that is reduced is the quality of the campaign.

The level of frustration in the industry is mounting, and I think it’s time we, as media owners, said something. I’ve looked at this issue from both sides of the equation; I can tell you that focusing on price alone almost never works. It’s a vicious cycle that sacrifices best quality for low costs.

Clients need to understand that there is no logical reason why moving from one representation to another should suddenly deliver cheaper prices, and agencies need to stop falling into the procurement trap.

Clearly, commoditization is an issue for all industries and there is no easy answer, but we need to better value strategic thinking and creative ideas. I’m hoping that increasing awareness of this ineffective pricing war will start a conversation in the industry so that we can shift the focus to include not just price, but also strategic vision, creative ideas, strong execution, and premium content. Let’s work together from the top down so that creativity and content remain the foundations of all our collaborative projects, and that we can use advertising to further our brands in the future.

Stuart Garvie is the president, media sales and marketing, Bell Media.