The Acceleration of Principal Media [REPORT]

A “The Acceleration of Principal Media,” reveals a substantial knowledge gap among marketers regarding the use of principal media. The purpose of ANA’s report is to increase awareness and to help educate marketers on principal media, including its background, benefits, and challenges.

Principal-based media buying occurs when agencies buy inventory from media owners at bulk rates and then resell it to clients at a markup. Agencies become the owners or vendors of the media, rather than acting as independent agents for clients.

For some marketers, this practice can produce media cost savings of 10-15%. However, the report unveiled several notable findings, including:

• Only half of the survey respondents (48%) are very familiar with principal media. 39% are somewhat familiar and 13% are not familiar.
• About half (47%) of respondents have used principal media in the past year. Just over a third (35%) have not.
• Almost one-fifth (18%) don’t know if principal media has been part of their company’s media activity in the past year.
• About one-quarter (27%) of respondents noted principal media was part of an agency pitch.

In addition, the study found that 41% of respondents expect to use principal media over the next year. Of those respondents, the use of principal media is increasing for 24% and staying the same for 55%.

According to the report, agencies and holding companies have increased their use of principal media due to downward pressure on margins, deterioration of payment terms and an overall focus on “driving media costs down.”

Principal media may offer marketers reduced costs. However, there are multiple challenges marketers must navigate, including an overall determination as to whether such purchases are in their brand’s best interests. Multiple respondents confirmed they had concerns about agency conflicts of interest. Other issues cited include the loss of full audit rights, the quality of actual media inventory delivered and lack of visibility into agency profitability.

“Transparency and accountability are paramount in media transactions,” said Bob Liodice, CEO of the ANA. “This report gives marketers the insights they need to develop a deeper understanding of principal media, along with guidelines that protect their businesses.” A marketer on ANA’s board of directors recently remarked, “While principal media can indeed provide the benefit of cost savings, marketers pursue such deals with their eyes wide open.”

The new report lays out guidelines that marketers can use to assess the usefulness of principal media, including:

• Keep agency contracts up to date, with clear language that addresses principal media.
• Agencies should be required to provide a clear business case detailing why principal media is recommended and to ensure consistency with the marketer’s media strategy and buying guidelines.
• Ask for options that do not include the use of principal media.
• Develop a clear internal approval process for the use of principal media.
• Require that principal media be clearly identified on media flowcharts.
• Request the same proof of performance metrics and access to transaction data for both principal and agent-based media buys.

To download report, CLICK HERE

Courtesy of The Association of National Advertisers