Sitting in the large conference room, Sterling "Mack" McEvoy, the head of the large media agency, was alone with his client Ted Schiaparelli, eponymous CEO of the fast-growing Schiaparelli's pizza chain now rolling national. Ted was pushing back hard on the latest media plan and Mack was surprised and trying to smoothly recover.
"In the pitch," Ted asserted, "we agreed that targeting actual known heavy purchasers of QSR based on card data would raise ROI +28%."
Mack grudgingly nodded, now at least knowing what was coming next. "So why are these indices so close to 100?" he asked.
Ted took the remote and clicked back a few slides showing the rotations that were planned, their CPMs, GRPs and indices of QSR purchase, which indeed were all just above 100.
"Notice we avoided any dayparts on any networks where the index was below 100," Mack said. "But in order to minimize the CPM and maximize the reach, we could not buy fixed positions in programs. That would have driven up the CPMs and reduced the reach."
"Hmmph," Ted mumbled, unsatisfied. "In the pitch I got the impression that we were considering only fixed program buys because of the context resonance factor, which we agreed would raise ROI +36%."
Mack took back the clicker and went to another slide. "Look, we took resonance into account as well, just as we promised. Look at all these dayparts we bought on all these networks. They all average above 20% resonance with your new ads, and the industry norm is 19%."
"Yes," Ted shot back, "but the industry studies show that double digit sales lifts are at higher resonance levels, like 30% or more. I've seen resonance data, and some ads and programs are 100% resonant!"
"Not for rotations," Mack said, sympathizing. "We save you millions of dollars buying rotations."
"But you may be costing me hundreds of millions of dollars on the sales!" Ted growled. "Please go back to the drawing board and bring me a new plan focused not on cheap impressions but on profitable sales."
"I can't," Mack said, looking sad.
"What do you mean you can't?" Ted asked.
"In our contract, the agency will have to pay you back out of our own pockets if we fall short in our sex/age GRP guarantees, or in our sex/age reach guarantee," Mack quietly replied. "The kind of plan you now specify will cause us to have to pay you for shortfalls in sex/age in order to get you the engaged purchaser impressions and reach you now are asking for. We'll have to change the guarantees before we can bring you a plan like that."
Ted looked flummoxed. He didn't want to have to explain this to investors. Better to not make an issue of it and hope for the best. One of his investors was a well-known industry personality who had supplied Ted with the standard client/media agency contract form. Ted was lucky the chain had caught on. Best not to try to buck the industry standard way of doing things. He knew it had been this way for a long time.
The foregoing allegory reflects a real situation -- especially in U.S. television today. All practitioners know how to increase the sales and branding effects of TV ad spend. It involves program-level buying and branded integration, fast reach, commercial weeding and many other tactics proven and replicated many times by many practitioners. Yet many of the same practitioners are still doing mostly rotation buying because the contracts make that outcome inevitable. The advertiser signs these contracts and by doing so signs away the right to make the smartest possible buy that will have the most positive short- and long-term business results. The bulk of the industry is painted into this corner.
It's easy to change. The next renewal or start of a media agency contract, incent the agency to deliver what you really want, not what inertia from 1960s contracts says to do. In the next post, I'll reveal what such contracts might look like.
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