The Media Age

Choose a finer blade to restructure in 2009

Cutting Costs Should be the Final Step in a Series of Prudent Management Initiatives

Cutting costs is not restructuring; restructuring is positioning your media agency for continued prosperity in difficult times

 

Get ready for a regular series of trade headlines about media agency staff cutbacks to reflect uncertainty about next year’s revenue expectations.

Since payroll is the principal expense of these companies, staff cutbacks are likely inevitable in the face of declining ad billings and income. Unfortunately this may be the only action taken by some media agencies to shore up their figures for next year. This will represent a huge new business opportunity for competitors who approach restructuring in a more comprehensive disciplined manner.

Here’re some steps to follow to convert next year’s financial dislocations into growth opportunities for your media agency.

1.     Operations

Begin by reviewing every aspect of your operations to streamline and maximize the efficiency of every business process. Can paperwork be replaced by systems? Are some actions duplicative; i.e., copying and faxing insertion orders?

Note that I haven’t mentioned computers. It takes time to move actions to IT. However, it takes very little time to insist that media sellers who have been insisting on maintaining old-fashioned practices cease and desist and comply with more efficient operating procedures themselves. Too much of what goes on in today’s media companies is manual and redundant.

The bottom line. Make your agency as efficient as it can be before considering reductions in staff.

2.     Uniformity of Procedure (The Fry Manual)

Working with McDonald’s as a client some years ago, I learned one of the secrets of their success. It’s symbolized for me by The Fry Manual, an extensive training document and procedural guides for ensuring great french fries in every serving at every restaurant globally. Everything was in the manual: how hot the oil should be, how long fries could be retained for sale until they had to be thrown out, etc.)

At DeWitt Media, we developed a “fry manual” for every step of every procedure in the company. Spot TV buying, for example, illustrated every action from developing projected costs for planners through to post-buy analyses. Every form used was illustrated. Time lines and report formats were provided. Similar documents were prepared for every department: media planning, magazine buying, out-of-home, etc.

As a result, a new employee, whether a trainee or a veteran from another media service, could be brought fully on stream very quickly and operational excellence maintained at all times. Hot fries every time.

Ensuring uniformity of procedure is a way to achieve maximum operating efficiency while maintaining a high quality of service and product.

3.     Quality of Service

The primary risk in just ‘cutting back’ without a comprehensive restructuring plan is that service will suffer and result in a loss of clients. This is of course disastrous since it is axiomatic that it is far easier to retain current clients than to get new client.

The probability is that advertisers will want more from than agencies in tough times, not less. Remember, your client contacts want to keep their jobs and if the choice is between you and them, there’s no choice.

Increasing quality of service, especially responsiveness and face time, is not usually a task best performed by junior people. Yet ‘cutting back’ often means replacing experienced personnel with less costly relative ‘newbies’.

It is possible that operational excellence and procedural uniformity will impress clients with your agency’s reliability. But reassurance and ‘hand-holding’, always important and even more essential during tough times, requires more experienced hands.

The bottom line: Don’t downsize the quality of your service and product in tough times. Clients will notice and go elsewhere.

(More to some in this series. Comments are welcome)

New Year’s Resolutions for Media Agency Management

Media Managers will need to react early to the effects of the global economic slowdown. Top priorities for '09 will be to:

·       Reduce costs

·       Reduce costs

·       Reduce costs

·       Maintain profitability

·       Gain new revenue

 

While it is sometimes difficult to predict the future, there is no question in my mind that as media agency managers pitch their 2009 budgets to holding company management in the next few weeks, the focus will be on maintaining profitability in the face of inevitable declines in media billings and revenues resulting from the global economic debacle.

 

The challenge of course is keeping clients and revenues stable in the face of operating cost pressures and what will be extraordinarily intense competition for new business. (New business for one agency=account losses for another; it’s a zero sum game.)

 

Maintaining quality of services, relationships and responsiveness in this environment will require a skill set that is perhaps rare in the upper echelons of today’s media shops because leaders appointed in the past few years have been more heavily skewed toward business development flash and dash vs. the perhaps more mundane but extraordinarily complex management operations of a modern media agency.

 

Many new media managers, coming from small network departments and/or new media may not be sufficiently knowledgeable about the activities of media buyers for other media (print, radio, out-of-home). Will they be up to the task of fixing the train while it’s roaring down the track?

 

In addition, the odds are that pressures against agency cost cutting will increase as a result of changes currently taking place in the overall economy. For example, many advertisers paid very high media price inflation premiums in upfront television buys that continue into 2009. If current ad rates decrease due to the global economic debacle, won’t these same advertisers demand that their media agencies renegotiate these media costs? Of course, they will and as we all know, agencies can’t collect a second commission for doing the same job twice.

 

How to restructure a media agency and how I think the business will evolve from here will be the subject of future postings. Meanwhile, I invite your thoughts, comments and suggestions.

Muddle in MediaLand. Agencies Shoot Themselves in the Compensation Foot

A million trainees tapping on a million keyboards is not the way to manage media.

The Delaney Report's March 10 Issue leads off with the headline "Media Muddle" and then goes on to discuss the challenges that media agencies and their holding companies are facing in trying to maintain profitability in the face of client pressures on compensation and the need to serve clients on an increasing number of media platforms. (To see this issue, please download the PDF file at the bottom of this post.)

Although my professional goals at this time are to serve on relevant boards and advisory panels, I did last year undertake to manage the media service for New York Life Insurance. In the course of this experience, I oversaw the placement of a few dozen million dollars in all media. What astounded me was how 'manual' and unwieldy much of media buying still is. In fact, some of the transaction processes haven't improved very much in decades, a period when virtually all other industries have achieved huge productivity gains via technology.

Mike Lotito of Media IQ is quoted as saying that "Media agencies need to invest in technology and stop hiring 50 people when they win a new piece of business." I know Mike and have no doubt that his observation is accurate.

This is confirmed for me by a recent college graduate whom I helped to place in an entry level position in the network department of one of the mega media agencies. His job consists of endless and mindless hours of rekeying TV buy data into the Donovan Data System, itself one of the dinosaurs of the business (I should know; my experience predates DDS).

In the late 1960's when I was a media planner at the then fledgling agency Ogilvy & Mather, I learned that the financial department had hired a computer programmer to develop software for them. At the time one of my assignments on the Instant Maxwell House Coffee brand was an annual media analysis that consumed six "person weeks" of time at the beginning of very planning year. I taught myself a computer language called "Basic" and then collaborated with O&M's computer programmer, Hal Samuels, to develop something we labeled NASTEA for Network And Spot Television Expenditure Allocation. The resulting software completed the analysis overnight, on punch cards.

When I launched DeWitt Media in the early 1980's it was on the back of the 'new' IBM PC and a spreadsheet program called Visicalc. I figured that with these new developments I could do the work of 200 agency media people with 20 people trained to work with this technology. I did and it worked. Because ad agencies at the time had no interest in investing any money in their media departments, we thrived and eventually came to compete effectively with the biggest of them.

Now it appears that these media agency behemoths have lost sight of the necessity for businesses not only to grow revenue but also to increase productivity constantly. Perhaps this is because so many media agency leaders are former network television buyers and who therefore have never run a business as complex as a media agency.

Whatever the reason, it is clear that the media agency industry requires a major productivity initiative to provide clients with the services they want at prices advertisers are willing to pay. One side of this coin is of course to increase the perceived value of media agency services that are commodities and perceived as such. Another imperative however is to harness the latest technologies to enable media agency work to be done in a far more efficient and timely manner.

Perhaps then the agencies can find time to train their junior people and to empower them to use their intellect on behalf of the agencies and their clients rather than fritter ways years of their lives and billions of brain cells rekeying data.

Download delaney_report_31008.pdf