By Jeremy Lee, marketingmagazine.co.uk, 02 June 2009, 08:30am

Marketing video roundtable: What comes after a 'perfect media storm'?

LONDON - The media industry has been hit by an unprecedented combination of rapid change in the way that people consume information and the worst advertising recession for years. It was timely, then, to convene a meeting of some of the UK's top marketers at Media 360 to join a discussion sponsored by Accenture.

Much has been written about the threat this so-called ‘perfect storm' poses for media companies, but for advertisers the situation is potentially rather positive.

Media fragmentation now means that some channels can be removed from advertisers' schedules altogether without adversely affecting reach. Meanwhile, agencies, in common with most other advertiser suppliers, are being forced to realise they need to be more competitive than ever to retain business. Many are now willing to include performance-related elements in their contracts.

This shift is acknowledged by Mark Sinnock, chief strategy officer at Fallon and incoming marketing director for Asda (main picture, left). ‘With my agency hat on, we've all had an incredibly hard six months and all brands are demanding renegotiation,' he says. ‘The interesting thing is that everything seems to be moving from a fixed to a variable model. Clients are trying to move to a performance-related relationship that includes a very small retainer.'

James Walker, president, media management at Accenture Marketing Sciences (below right), has also noted a profound shift in the advertiser/agency relationship. ‘We're seeing a pitch frenzy at the moment and advertisers are getting 15%-20% savings guaranteed - the threat of a pitch is enough to get value,' he says.

This presents advertisers with a dilemma - should they squeeze their agencies and/or call a pitch; or, given the adverse conditions, should they build deeper connections with them?

According to Roisin Donnelly (below left), UK & Ireland corporate marketing director for Procter & Gamble, cost-cutting is risky. ‘The main cost is talent. You're not reducing the fees and getting the same talent; you're reducing the fees and reducing the talent,' she argues.

Tom Gill, marketing communications manager for Scottish & Newcastle UK (above), says that, as with customer base, companies' agency partners are particularly important in the context of recession. ‘If you lose those relationships in some of the most testing times, then you could struggle,' he adds.

The consensus was that advertisers and agencies understanding each other's business was crucial. The group felt the ultimate goal was to move away from a commission-based remuneration model, to one based on results. However, the growth of digital, and the number of stakeholders, make this difficult to achieve.

For their part, agencies are being forced to re-evaluate and, in many cases, re-engineer their businesses. Sinnock says they are moving from offering core skills to flexible ones, particularly in the digital space, partly as a reaction to the financial pressures agencies face.

Donnelly agrees that this is inevitable in a super-served marketing communications sector. ‘In the future I think agencies need to integrate and you won't have lots of different agencies - I don't need six planners and six suits,' she says. ‘What we're struggling for right now is one communication idea that can work across different media and what we're seeing already is different agencies working together in other parts of the industry.'

While acknowledging that competition for ideas is healthy, Nicola Young, director of marketing communications at Coors Brewers (main picture, right), welcomes changes that lead to greater collaboration. ‘We're still seeing agencies that won't sit around the table together. They need to get more grown up about this in the future,' she says.

Gill adds that agencies need instructions on how they should co-operate. ‘If you set the ground rules, the agencies will start to play together,' he says. ‘As a client, if you tell them what you expect, they learn quite quickly.'

However, this may all become irrelevant if the trend toward media owners cutting out the agency middleman and dealing directly with advertisers gains traction. There are clear benefits for the media owner in avoiding commission, but there are also potential advantages for the advertisers as well.

‘ITV has seen an opportunity to destabilise relationships and deal directly with clients,' says Sinnock. ‘As well as media deflation, it indicates a need for innovation in the market. Having a direct line into media makes a huge difference. We can create commonality, which is more efficient in getting speed to market.'

Andrew Morley, vice-president of marketing for Motorola EMEA (above), believes that key to any relationship, whether with a media owner or an agency, is a single ‘big idea'. ‘If you are spending less money and using more media, then you have to have just one idea,' he points out. ‘You can't have different things on point-of-sale and outdoor, for example, as you will confuse consumers.'

While the rate of change in the UK seems difficult to keep up with, Morley suggests that, in other markets, developments are taking place at an eye-watering pace. ‘We have just moved into Russia and that makes the UK look slow. A TV spot will cost you a third of what it was a year ago,' he says. ‘All of a sudden, the world has exploded. All your media experience has gone out of the window as everything has changed.' He also points out that it still costs three times as much to achieve the same reach in the UK as it does in France.

This suggests that the UK media market might still be facing some upheaval. ‘The next three months will be critical,' says Gill. 'We've got some dominoes teetering. The current structure of commercial TV will have to change.' Sinnock agrees, predicting that the enormous growth in channels in recent years will be reversed. ‘Multi-channel is going to become less multi,' he concludes.

This presents advertisers with an additional conundrum - is there a future for advertiser-funded television? Advertisers want there to
be, but say that consolidation is required. They also want to see the relaxation of restrictions, particularly those affecting advertiser-funded content, as the current model is unsustainable.

The past 12 months have seen the media landscape alter at an unprecedented rate and it is clear that there is more change to come. For advertisers, keeping abreast of developments will be critical to maintaining a competitive advantage because, only by doing so, will they be able to take advantage of the opportunities.