Thursday, August 05, 2010

Balancing Value & Cost

Procurement was invented because finance could not see eye-to-eye with marketing. The question became, how do we better balance value and cost?

The answer: The procurement officer. Unfortunately, it’s a result that no one seems too pleased with.

I have nothing against procurement in principle. I just think the most clients are using the wrong person to be in charge of procurement. It shouldn’t be someone on the marketer’s side.
Or, the agency side for that matter.

It should be the viewer.

On the digital platform, we now know how long viewers pay attention/are engaged in a commercial. The more of the commercial that is watched, the more value the commercial delivered to the advertiser. Not necessarily in terms of sale, although we hope that would also be true. But strictly in terms of production budgets. Advertisers pay big money to have commercials be produced. (The average production budget for a national spot is $366,000.)

An advertiser’s primary objective in producing a commercial is to have it be watched. If it’s thirty seconds, they want all thirty seconds watched. Otherwise, they would have produced a fifteen-second spot.

The fact is, the more of the commercial that is consumed by the viewer, the more value the commercial delivered to the advertiser.

So why don’t advertisers pay their agencies accordingly?

The more of the commercial that is watched, the more money the agency makes. The opposite also would hold true.

This allows procurement to based on what happens (view duration) rather than on what someone decides is necessary to make something happen.

It also puts the added weight on the agency’s shoulders to deliver.

As it is now, when a commercial doesn’t work, the agency can always blame the procurement officer.

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