Media agencies are being tasked with managing complex omnichannel consumer experiences on behalf of brands. They should be rewarded appropriately, argues Wavemaker’s Anna Hickey.

The rapid acceleration of key trends in the marketing industry during COVID has created a particular challenge for the way media agencies are rewarded by clients.

Consumers interact with brands, spend their time with content and media, and buy products and services in a very different way from just two years ago. In most markets, consumers have moved from traditional channels of communication into a complex system of experiences across digital platforms. For brands, this makes it harder to reach an audience at scale, expensive to engage and almost impossible to predict.

Adults in the top 19 global markets spent on average 2.3 hours more per week online in 2021 versus in 2019 – and yet the weekly reach of advertisements on social media and online video has declined by 8% and 4% respectively. Time spent on online streaming services has almost doubled in the period from 2016 to 2021 (Sources: Global Web Index, Europe, IPA Touchpoints, UK).

The complexities for us as marketers in dealing with this accelerated impact are many, but for media agencies, and those in client organisations whose job it is to procure our services, it’s about to get a whole lot harder.

TV pricing is no longer a relevant indicator of agency performance

Many agency contracts are made up of remuneration terms that deploy a degree of risk and reward. High performance unlocks rewards, while performance below the committed terms results in financial penalty. For media agencies, the risk/reward system has long been heavily reliant on media pricing commitments and, in particular, the baseline pricing achieved on linear TV.

Thanks to the accelerating impact of COVID, and the growing financial clout of the global streaming services, linear TV audiences are falling away, and media pricing is inflating rapidly. Even the most skilled agency traders cannot counteract the fundamental market forces of supply and demand.

As a result, spend in linear TV has fallen rapidly in favour of other online video platforms (and digital in general). Savvy brands are adjusting their paid media spend in favour of investment in production and the creation of content and assets for owned and earned.

The trend creates an inconvenient truth that media agencies and client procurement teams must come together to tackle urgently: TV pricing is no longer a relevant indicator of agency performance.

Unfortunately, the solution is not straightforward

Media pricing as one of the indicators of agency performance in its broadest sense may still have some relevance, but with much digital media bought on a biddable model, the dynamics of pricing in digital require a different and more flexible approach if used to assess the agency’s performance.

If we as agencies are increasingly partnering with brands to build and manage complex omni-channel experiences for consumers, we need a new measurement for success. Our risk/reward system must reflect the outcomes we are seeking; defining success in KPIs related to short and long-term consumer beliefs and behaviour, rather than media performance alone.

In China, where linear TV has had a much smaller role in the marketing plan, there is already a more nuanced system in place, and agencies are more likely to be assessed on the digital investments. Like linear TV metrics, KPIs include cost and quality but also engagement-driven metrics like click-through rates and even ROI in some cases.

In the US, the TV market has traditionally been dominated by the seasonal upfronts and fixed annual media commitments to linear broadcasters. A new value exchange in TV could be implemented using data-driven tactics: if frequency and waste are controlled through an addressable-first approach, we’re buying more reach. That means that with the same spend levels, we will grow household penetration and steal share (and sales!) from the competition. By shifting perception from price to value, we can begin to merge the linear and streaming marketplaces into a holistic investment where we can outsmart the marketplace, not outspend it.

Smart procurement teams are shifting their risk/reward model to a multi-layered system of digital quality metrics, consumer engagement and KPIs related to the transformation of the marketing model. More clients are now including digital pricing commitments as part of the equation, but that also comes with challenges: there is often a misalignment between KPIs and a pricing template that’s tied to a CPM commitment.

Focusing on a more addressable audience, in higher quality, brand-safe environments will ultimately deliver a better ROI. We must then go beyond pricing as the main measure of success.

It’s not just how we measure success – but the way we define it – that must change

As media agencies we are increasingly partnering with our clients to build and manage complex omni-channel consumer experiences. Our risk/reward system must change to reflect the new outcomes we are seeking to derive from consumers. We should define success in KPIs related to short- and long-term consumer behaviour, not only media performance.