By: Treva Goodhead

Generally, we understand that higher performance, quality and potential return comes with a higher cost; if low price was the only hallmark of value, the stock market would only have penny stocks and cars would only be compact.

As an industry, we as advertisers, media buyers and media sellers often equate value with cost when talking about boards, spots, or impressions. We even refer to getting free things as "added value", as "free" is understood to be valuable. Yet the performance of a media plan in relation to the brand's objectives is what will ultimately determine a successful campaign, not solely the CPM paid in Edmonton, for example.

There will always be a healthy friction between media cost and objectives, but it is worth discussing the factors that stand in the way of delivering true value.

Emphasizing cost

At the agency level, the procurement model is driving the expectation of decreased costs and efficiencies versus either the previous agencies or the previous year. Reduced to the absurd, this philosophy would eventually see media campaigns that are free. If the top consideration is driving down the cost of a rating or an impression, then that is fundamentally at odds with recommending and executing a campaign that delivers on very specific business outcomes. When a media plan is tasked with driving purchase, reaching the target who is most likely to buy is far more valuable than simply reaching anyone and that key target might require purchasing media that is more expensive than what the last guys did.

Trying to guarantee efficiencies gives some degree of cost certainty, but it is done at the risk of elevating price as the first factor in building media plans, rather than a tactic's ability to deliver campaign goals. When assessing the effectiveness of a campaign versus its goals, it will never be that an advertiser is happy to see an unsuccessful, but efficiently costed, result. Maintaining flexibility and putting campaign objectives at the top of the consideration set may result in higher costs, but the ROI is likely to be far greater.

Value versus scarcity

From a supply level, our industry talks a lot about supply and demand. If we look at television and radio advertising, the overall loss of audience over the last few years has meant it takes more spots to buy planned levels. Buying more spots has in turn led to higher sell-through levels and this has been characterized as an issue of supply and demand: demand is high (though actually unchanged) and supply is low (due to audience decrease), justifying higher CPMs and year-over-year inflation.

While we can instinctively agree that something that is scarce will be more expensive, in this case can we say that the product is actually more valuable? Do these spots deliver the campaign objectives in a way that merits the increased cost? With other types of media able to offer detailed insights into effectiveness, broadcasters may find that as costs creep ever higher without a corresponding growth in the understanding of value, media plans will move toward those options where a much clearer connection between cost and effectiveness can be made.

Moving forward

Understanding that there are three key players (media partners, clients, and agencies), there are opportunities for each to tackle these competing forces. First, media partners need to show what value higher investment brings to advertisers. Charging more due to a declining inventory base isn't increased value. In each medium, having an ongoing set of proofs about the value of a product is key to securing continued revenue.

On the client side, the challenge is to see cost as part of a more complex value matrix. Incentivizing cost as the primary consideration will compromise campaigns, leading to more agency reviews and more promises of 'lowest rates' that will start the cycle all over again. Prioritizing business objectives and understanding the true cost of reaching them, will make for successful campaigns and accountable agencies.

Lastly, agencies have always been the bridge between media partners and clients, and it is important that we reinforce the concept of value beyond cost. This will allow each side to come forward with the resources required to create impactful campaigns. Agencies need to ensure clients understand and support the cost and ROI implications of high value audiences, while also encouraging media partners to prove value with solid research and demonstrable results.

Clearly, agencies will continue to negotiate on price and work to make all client spend meaningful and effective, but we will do so knowing the true value of the product is understood across all players.

Treva Goodhead is VP of investments at Magna