February 12, 2018 | Professional Services
Will 2018 mark the return of Mediapalooza? While that remains to be seen, it does seem like advertisers are already focusing on transparency and will be conducting media reviews in the first quarter of 2018. However, this year may not see the level of reviews, that one witnessed in 2015, since those were majorly driven by backlash to persisting non-transparent practices. 2018 is likely to witness shorter review cycles — from a five-year cycle to three years or even fewer (to ensure greater performance faster). Moreover, advertisers are becoming more open to evaluating new agency models rather than letting a single agency manage all channels.
In January 2018, Nike launched a reverse auction-style global review to take a fresh stab at its digital agencies. In this review, Nike signaled to the agencies that they could put pressure on agency fees by collecting rate information. The sportswear giant initiated this process through its global procurement department. Nike is in the process of collecting information of rates and capabilities from roster agencies. The company then plans to conduct a reverse auction event and update its contracts. Agencies, however, do not favor the reverse auction event as it signals that clients are seeking the lowest bidders. This could be bad news for agencies that are already struggling to adapt to the rising pressure from clients seeking lower rates. Reverse auction potentially helps in reducing costs but may not work in the long run, as hiring an agency just because it’s cheaper will not help the brand grow. Nike is undertaking the process due to a sales slump in the U.S. and spirited competition from Adidas.
Changes in the Media Landscape
Shifts in the media and advertising industry, including the role of decision makers, new hires and first-time chief marketing officers, indicate that agency changes are nearing. Moreover, when an agency tenure with a brand exceeds the average of 2 1/2-3 years, then that account becomes more susceptible to go through a review process. Lately, companies such as Tory Burch, Citizen Watch, 3M Company, and Stella & Dot have undergone structural changes leading to speculation that these companies will be making agency changes during the first quarter of 2018. In 2017, Stella & Dot made changes to marketing by appointing Lauren Uppington. This indicates that an agency review is likely to occur within 12 to 15 months. In March, 3M Company hired Venables Bell & Partners as its new creative agency of record (AOR) for its brands. The agency has replaced Grey and it is believed that media reviews will soon be taking place. The change of CMO has also made the account more susceptible to a media review. As most of the 3M brands advertise heavily in Q3 (during the school season), it means that planning must begin in Q1 of 2018.
The media landscape is poised for changes through agency reviews in 2018. Procurement needs to keep an eye on what competitors are doing and how they can attain efficiency in the review process in the coming years.