Monday, October 26, 2009

Digital Procurement

Word is that the Volkswagen of America business went to Deutsch last week rather than Goodby Silverstein and Partners because Deutsch was willing to cave into VW’s procurement requests and Goodby wasn’t.

Also last week, JWT pulled out of a pitch for the UPS $200 million global advertising account because of the drawn out financial and contractual discussions.

The situation is becoming dire as advertisers are becoming more willing to hire based on cost rather than the quality and the innovation of the work presented.

The assumption has always been that innovation and cost are on two opposite ends of the spectrum. In the past, when agencies could only be paid based on billable hours, this was more or less true.

In today’s digital age, this is less so.

The reason is that instead of paying agencies based on their hourly time sheets, advertisers can now pay their agencies based on viewer time sheets. A viewer time sheet consists of return path digital data that indicates how long a viewer was involved in a commercial for.

The longer a viewer engages with a commercial, the greater the chance to persuade the viewer why that product or brand is better than the competitors. In other words, the longer the view duration, the greater the chance the commercial has to work well for the advertiser.

Hence, shouldn’t the advertiser then be willing to pay their agency more for creating that type of commercial versus a commercial that garnered little viewer time spent?

Most advertisers I have talked with have responded affirmatively when asked that question.

Agencies are another story.

Except for a handful of exceptional creative shops, most agencies have answered in the negative when asked the same question.

That will need to change soon.

Agencies will need to come to the realization that they will be held accountable for results. The key is to base results on innovation and creativity rather than strictly having results tied into sales.

I would argue that view duration is a measure of innovation and creativity. Advertisers agree. It's time for agencies to come to the table.

The participation of procurement officers in the agency-selection process is only going to increase. Unless, of course, creative agencies suggest a way to be held accountable that isn’t tied to billable hours.

Using return path data as a form of digital procurement might be a good place to start.

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