Thank you and good morning everyone. We’re here today to talk about Schizophrenia. Schizophrenia is a debilitating psychological problem and to make sure we’re all on the same page, let’s review the definition:
“Any of a group of psychotic disorders usually characterized by withdrawal from reality, illogical patterns of thinking, delusions, and hallucinations, and accompanied in varying degrees by other emotional, behavioral, or intellectual disturbances.”
-- OR --
“A condition that results from the coexistence of disparate or antagonistic qualities, identities, or activities.”
My mother always wanted me to be a doctor, and this was my one chance to address a medical condition in public.
But seriously, folks, doesn’t this condition reflect what’s happening in our world today? How many times have you had a conversation with a client about saving money, lowering their CPM’s, changing the mix of elements or programs, all with the objective of getting better pricing for the same thing? And how many times have you had a conversation, five minutes later, with perhaps that same person or, more likely, a brand manager at the same company, about a special opportunity, or branded content play, or a tie-in with a network series—maybe Survivor, Apprentice, or Dancing with the Stars—that will be priced at a rate higher than the average, dare I say it, priced at a premium?
And how many times in the past 15 months have we been invited to participate in a media review which started off with a balance between the strategic approach to media and the implementation of media only to have it devolve into an almost complete focus on price, with the cost of media expected to be lower than before, and with an agency guarantee to deliver that rate. And I won’t even mention the cost of service?
How am I to reconcile these divergent goals and objectives?
How do we balance the goals of the brand manager who is looking to build brand value, increase sales, differentiate messaging and brand values from the competition, and drive their business from those in the brand manager’s own company who are seeking to reduce marketing costs both through the cost of media and cost of service?
I believe this single question poses the biggest challenge and in some ways the greatest threat to the future of media agencies. And while I can’t definitively answer the questions, I would like to propose some possible solutions, or at the very least offer some serious food for thought.
I want to address this problem in two parts. First, we are charged with helping clients and brand managers build value, increase sales, and differentiate messaging from their competition. There are several ways we achieve this, but overall I think we have to look at the answer in terms of the Holy Grail of marketing—ROI. And when we look at ROI, I believe we have to consider benchmarks.
We all believe, and rightly so, that we invest our clients’ marketing dollars wisely. But the yardstick for our decisions and recommendations—and the one thing our clients’ hone in on when looking to reduce the cost of media, is CPM. That’s been the benchmark and continues to be the benchmark to which we compare everything.
Yet, this benchmark has changed on at least two occasions for no other reason than Nielsen’s change in methodology. And in both instances when the CPM went up, we accepted the result because we acknowledged that the information was better, the rating better reflected reality and gave us a better sense that what we bought was actually being delivered.
The first time this happened, over 20 years ago, was when the change in measurement went from diary to people meter. The average demographic rating went down almost 10 percent, and the CPM went up proportionately, but we accepted the increase because the measurement was more accurate.
The next change came three years ago when we accepted the conversion to commercial ratings-plus three days of DVR playback, or C3 as it has come to be known. We agreed C3 was the correct and next most logical step in audience measurement because now we were measuring commercials, not programs, and it adjusted for the skipping that we know occurs in DVR playback. Again, initially, audiences went down, CPM’s went up, and we all agreed. It was a better measurement. And look what’s happening now, as DVR penetration has grown, C-3 network ratings are higher than live, and cable C-3 ratings are generally on par with live.
And what about the next development? The explosion of data goes well beyond what Nielsen provides today in its television measurement. Let’s talk for a moment about the availability of data and information that allows for better targeting via the internet, addressability, and virtually all digital media. I say that’s terrific. It’s what we’ve been striving for—reduce waste, reach the consumer we want, either the prospect or our loyal consumer.
But reducing waste also means we’re lowering the absolute number of people who see our ad, thus increasing the CPM. Sounds like we’re back in that schizophrenic mode.
With that in mind, let’s take a look at what information might do in a television addressable world. And addressability isn’t that far away.
Let’s see how we look at a program today. Here’s a primetime show that has a unit rate of $150,000 and an Adult 25-54 CPM of $27. That’s the standard way we tend to look at things and then make year-to-year comparisons. Now, I know we do this as a whole package but bear with me a moment.
What this client really wants to do is reach an upscale audience of Adults 25-54 with an income of $125,000-plus. So let’s add that to our chart. Oops, now it’s $165 or five times higher than our Adult 25-54 CPM.
Now along comes addressability and a promise that—through targeting—the same primetime spot will be able to reach only the specific homes with incomes of $125,000-plus for a CPM of let’s say $100.
Wow, that’s 40 percent lower than the previous example, and by the way, the cost of that spot is $92,000—40 percent below the $150,000 for the full national commercial that we pay now. As a marketer, my target CPM is $100.00. Is that high? I might not think so because there’s no waste, I’ve identified the specific target audience of Adults 25-54 in $125,000-plus households, and I’m reaching only them. And I’ve reduced my marketing costs by $60,000 for every :30 second unit by eliminating waste. If I was able to do that on $25 million of my TV buy, I’ve saved $10 million. That’s real money that can go to the bottom line.
But it was only possible because we redefined the benchmark. And all the benchmarks are being redefined.
Moore’s law states “the number of transistors that can be placed on an integrated circuit has doubled approximately every two years.” And thus computing power and the view of processing speed and power is consistently redefined. So, too, must we redefine how we measure and what comparisons are relevant in this technologically driven environment.
The availability of data and the pace of technology that allows us to utilize this in our decision-making is changing the game … faster than we could have forecast. Just as the designated hitter rule changed the American League, giving managers an entirely new range of choices and decisions, so too we as managers and investors of our clients’ marketing funds have a new range of investment choices. These choices cannot be governed by the old rules of age, sex, demographic, and age / sex efficiency. We need to look at things differently, evaluate differently, and make decisions differently—with a simultaneous understanding that the benchmarks must change as well.
But the good news is that I believe we can now mount a very convincing challenge to the old John Wanamaker quote that all of us know so well. Wanamaker worried that half the money he spent on advertising was wasted, but he didn’t know which half. I believe that as a function of new technology and new benchmarks we are now reaching the point where none of the money our clients spend on advertising will be wasted.
Now if you recall, at the beginning of this speech I said I wanted to address the challenge I presented in two parts. I’ve just talked about how we can help brand managers realize increased ROI, and now I want to address the second part of the challenge, which is how to satisfy procurement officers at the same brand manager’s company who is seeking to reduce marketing costs both through the cost of media and cost of service.
How do we do it? Once again, I believe the answer lies in benchmarks. Put simply, I believe we must redefine our roles to explain and clarify exactly what we do for our clients while demonstrating the contributions we as media professionals make to their marketing and media efforts.
The fact is that there are some clients who still think of us as media planners and buyers, and that’s all. But you and I know that nothing could be further from the truth.
Media professionals today are so much more than the definition and benchmarks that were pervasive just 15 years ago. Over the years we have totally and completely embraced the mantel of marketing and communications expert. We have become experts in consumer research, econometric modeling, market mix modeling, programming and production for broadcast and the web, branded entertainment, and many other disciplines that contribute to our broad scope of expertise. The strategic planning that we do is not simply putting X’s in boxes on a flowchart and enjoying three martini lunches. And the execution of these plans and negotiation of time and space is not solely driven by lowest cost, but by the same principles that allocated funds to that media in the planning process.
The fact is that every single Request for Information from a client or consultant that I have seen wants to know the same things and asks the same questions:
- What are your strategic Brand Planning Capabilities?
- How do you address Communications Planning?
- What is your process?
- What research sources and tools do you subscribe to and use?
- How are these tools applied to the process?
- What is your structure and who will be working on our team?
- What is their background and experience?
- What are your digital capabilities and how are they integrated into the process?
- How are Consumer Insights incorporated into the planning process?
- What are your analytics and measurement tools?
- Etc., etc., etc.
As media professionals, we address, answer, and deliver on these issues every single day. It requires smart, inquisitive, thoughtful, insightful, hard-working and dedicated people to analyze all the data from the brand, couple that to our research tools and make the best decisions to match brands’ goals and objectives to consumers. It’s not unlike intellectual prowess and thoughtful advice and counsel in specific disciplines we receive from our lawyers and accountants who are expert in their fields.
It’s not all about price. It’s about the combination of smart and strategic planning with smart and strategic implementation.
The 4A’s has addressed the subject of the value we bring to the clients we serve. There is no better time than now to fully recognize that our expertise and capabilities have done much to build the value our clients’ brands enjoy today. Just as different ingredients in products make them better tasting, more effective cleaners, or last longer, so too do our efforts aid in differentiating products and contributing to their sales and the value to their companies.
I suggest to you that the benchmarks for measuring our work must change to reflect what we do and the complexities of marketing, not just buying, in today’s environment.
We are not commodities. We are not an ounce of cereal that can be removed from the box, nor the ounce of chocolate removed to make the candy bar smaller, all the while maintaining cost and driving the price per serving higher. We are full service marketing partners whose value goes well beyond how cheaply the price can be negotiated.
So in conclusion, I just want to reiterate that if we are to succeed in reconciling the schizophrenia that has insinuated itself upon our business, we need to review and redefine the benchmarks we have used for so long to evaluate our performance and our relationships with our clients. The priorities of our business and the rules that have governed our actions have changed, and so must the benchmarks we use to calculate our success or measure our shortcomings. And I believe it’s up to us to make our clients aware of why these changes are necessary so together we can begin to realize them. Let’s get started.
As my tenure as Chairman of the 4A’s Media Policy Committee comes to a close, I would like to take this opportunity to thank Nancy Hill, Mike Donahue, Tom Finneran and Donna Campbell of the 4A’s, for all their assistance and guidance while I served in this position and all the Media Committee Chairs and members who give their time, energy and insights into the issues we face in our evolving industry.
I would like to particularly single out Kevin Gallagher of SMG and Kathy Crawford of GroupM, who so capably spear-headed the Local Broadcast re-invention effort, and David Cohen of Universal McCann, who led the 4A’s initiative on digital re-invention, who worked with a whole host of colleagues from all facets of the digital landscape in developing new and smarter ways for us to work together more efficiently. You’ve really moved the ball ahead, and it’s much appreciated.