APA chief executive Steve Davies warns against the dangers of procurement labelling advertising spending as ‘working’ versus ‘non-working’
I am on something of a mission to understand procurement. We complain they don’t understand how to buy creative services (often that is true, as betrayed by their opening questionnaire at the start of every production) but they are also important and an opportunity. Important because they are part of the client – or advisors to the client – and have insights and influence – and an opportunity because they play a part in deciding who gets what work. And there are good procurement people out there who do understand marketing and value and not just price and can help us to better understand clients aims.
So I was at Procurecon 2018 in London the other week. That’s the most important marketing procurement conference. Indeed, for the second year in a row I was part of it, having been invited to chair a panel on production value.
It is fascinating getting to meet and understand procurement people from clients, as well as the consultancies that advise some of them.
What I took from clients is how confused they are, understandably, by all the means of communication with customers open to them and how to manage the creation of work for all those channels, what to focus on, how to obtain value – indeed, what value is.
Gone is having one agency to answer all their marketing needs. They know that. But the alternatives are both exciting and overwhelming. If they are managing their own advertising and having an agency for some things, perhaps going direct to a production company for others and doing some work themselves, the knowledge of all the advertising options required and expertise in making them work is a steep learning curve, that most are only at the foothills of.
Many of them would benefit from doing some of their work, at least, direct with production companies. We need to do a lot more to explain to them how they do that and make them comfortable about the process and assessing value. If they can’t do that, they won’t buy.
What alarmed me was the approach we had from Moritz Wuttke, COO at Group IMD and Honeycomb and Jon Couzens, head of global procurement at Specsavers, whose slides analysed advertising spending by working versus non-working dollars. It alarmed me because advertisers are clearly in need of guidance as to how to use the multiplicity of media available to best achieve their goals and that a central tenet of that guidance is wrong.
Media companies, with the help of some procurement consultants, have managed to perpetuate the great myth that media spend is working media and production costs are non-working media!
So they analyse each advertising media for clients by looking at the working dollars (media) versus the non-working dollars (production).
Of course, that is designed to make an advertiser see media as the valuable place to spend its money and production spend as wasted.
A media company’s advice to clients is based upon helping them reduce the proportion of their spend that goes on non-working dollars (production) as against media.
This is such a bizarre and transparently self-serving mind trick, I don’t understand how they have got away with it.
So according to Exane BNP Paribas estimates, for traditional media (TV), non-working media (production) is typically 12%, for search/display it is 15-20% and for mobile/social 55-60%. Somehow this leads them to conclude that the balance between working versus non-working media is most efficient in TV and least efficient in mobile/social!
As APA Chairman John Hackney is apt to say about this kind of nonsense, it is looking down the wrong end of the telescope. Most importantly, it is dangerous and misleading for advertisers.
Richard Huntington, the chairman and chief strategy officer at Saatchi & Saatchi highlighted these dangers, highlighting how describing the cost of creating something (being both the agency cost and the production cost) as “non-working” had created a mania among chief executives and chief marketing officers to slash those costs. In an article in Campaign, Richard described the phrase “non-working marketing spend” as “one of the most odious phrases in the English language”.
This is at the heart of advertising’s malaise – it’s no wonder that we see so much instantly forgettable advertising landfill across different media.
Clients are getting the wrong information from their advisors – to cut creation costs and make the wrong decisions as a consequence. If you look at the advice from these advisors to clients on marketing, you can see the depth of the problem – it’s the whole premise of their advice to brands. This is terrible for brands and terrible for companies making advertising.
Some procurement consultants recognise that (for example, APR and Trinity P3) and are clear on their advice to clients that that is the wrong approach. But the phrases “non-working” to describe the creation of advertising material and “working”, to describe its dissemination are still pervasive and being peddled by many.
The starting point must and always should be that the work created is critical. And it is critical that it is impactful and relevant because otherwise whatever the media cost is, it is wasted.
We need to fight back. Let’s call the cost of producing advertising material the advertising cost and the media cost the distribution cost. That’s what they are, isn’t it?