Like the rest of the world, the SA media agency industry is experiencing tremendous change - change that is primarily driven by technology and the effect it has on consumers' interactions with brands. We need to actively engage with the digital environment: integrate it into our media strategies and solutions, and help our clients' brands find their way through exciting new channels of consumer engagement.
Fortunately, as an emerging market, we will have the opportunity to "jump" change (as opposed to "step") largely through our mobile penetration, and the fast uptake of smart phones.Fragmentation of audiences and proliferation of media channels will accelerate over the next few years with the switchover to digital terrestrial television (DTT) and ever-evolving online options. Who could ever have imagined social networking offering such great opportunities for branding?
So, in this fast-changing environment, what challenges do media agencies face ? The current media agency model is based on being an intermediary between big business (media owners) and big business (the advertisers). The expertise we add is around a sound understanding of consumer target markets and media consumption habits, in-depth knowledge of the various media products available, an ability to renegotiate price and deals, and creativity when applying all these aspects to the brands we represent. Clients require their agencies to become business partners, to immerse in their business and own brand futures together.
The most serious challenge that has arisen around this model is that of remuneration. Advertising and marketing budgets are often some of the largest allocated by any business and tend to attract attention from all its parts (especially procurement). This has resulted in the commissions or fee charged by media agencies being put under more pressure. Coupled with this, tighter contracts governing the relationship mean income streams like interest earned are significantly reduced. And we haven't helped ourselves: we undercut one another to secure business (even though volume from billings doesn't really count in the SA market where negotiations are done at client level).
Many of the other challenges facing us are created by these lower margins. It results in media agencies having little room for training and development, finding it hard to fund bigger initiatives that may lead to improved efficiencies, and losing talent as salaries are uncompetitive in the wider industry. Lower remuneration leads to the inevitable - you get what you pay for.
There is not enough differentiation between media agencies. So where to next?
The move upstream to a consultancy model, where professional agency output is paid for the perceived value it adds, has to be the future. The implication of this is that we need to employ different types of people - communication and statistical graduates who enter the industry for a career, not just a stepping-stone. We need to generate interest and excitement about media as a career at universities and even school level so it is seen as a cool choice, and a respected one. Many of our clients have in the past attracted the crème from our tertiary institutions; if we are to succeed in the future, it has to be us that this talent aspires to. This is no quick fix, but sound graduate programmes can change the industry.
At the same time as we address talent, we need to face the question of remuneration. Fees should cover only the most basic scope of work - table stakes in our game. The negotiated bonus should cover performance against a strong measurable set of key performance indicators and have upside potential for excellent performance. Currently, most bonuses only help cover base costs, and it is virtually impossible to score full marks.
Income streams from other areas that help in the repositioning of the industry, like econometric modelling, communications consulting and content creation, need to be explored and changed accordingly. To round it all off, we as agencies need to create clear and differentiated positionings - identities that separate us and give clients a reason to buy.
- Phillips is MD of Mindshare
