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Can Media Regain Control Over Ad Pricing and Value?

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It's called value. Marketers have lost their sense of advertising and media value.

The drive toward increased media commoditization, which has reduced the cost basis of most major media in the past few years, is more than a cost-reduction strategy by advertisers. Rather, it represents a dramatic restructuring of their priorities. As advertising has accounted for a smaller percentage of their total spending, marketers have systematically focused on those media that offer the greatest cost efficiencies, with little reluctance to walk away from those media and/or companies that are least efficient.

Marketers have demonstrated a willingness to eliminate any media company or medium from their marketing plans, or even to walk away from advertising altogether if necessary.

Those media companies that believe a renewed economy will send their rate cards shooting up are in for a shock. The most successful media companies will be those that identify and develop new and innovative opportunities to increase their value to advertisers at lower costs. Advertisers want quality; they will support media that invest in building stronger relationships with their audiences. But advertisers have also made it very clear that they consider media costs to be too high. Media cannot expect to fund enhanced capabilities and services through increased costs. Advertisers want to have their cake and eat it too. They require enhanced services at reduced costs.

The United States, to reduce the deficit and avoid inflation, must operate government at dramatically reduced costs while increasing services to both its populace and the world. While doing this, it must fund a superstructure and marketing programs that enable American corporations to compete on quality with the Pacific Rim and European nations.

This demands improved efficiencies. Funding of a business, like our nation, can no longer depend solely on increased revenues. Operating costs must be reduced. Salaries must be brought into line. Underperforming employees can no longer be supported. Advertisers, for their own survival, will inevitably cease their funding of those media vehicles that are no longer measurably productive for them. Marketers will no longer support those media that are not effective and efficient. The fragmentation of advertising budgets, which escalated throughout the 1980s and 1990s, is reversing itself. While fiber optics, digital compression, interactivity, addressability, satellite distribution and other technologies suggest continued fragmentation of television media, advertisers are no longer willing to fund these advances.

Marketers currently have available to them relatively effective and efficient vehicles for promotional and direct marketing activities. While interactive technologies may enhance these capabilities in television, they are accompanied by a high price tag. Programmers may envision the appeal of a 500 channel TV universe and an infinitely expansive online universe, but consumers and advertisers have made it clear they are unwilling to fund these endless numbers of channels.

Magazines, newspapers and cable television are primarily dependent upon a dual revenue stream: advertisers and subscribers. If mass media disappear, replaced instead by myriad low rated, small circulation vehicles, advertising revenues will most certainly continue to decline. Messages can be distributed to small groups via direct marketing and promotional efforts more efficiently and effectively than print or television media. The success and growth of small circulation media are driven by the broad awareness-building capabilities of their mass circulation counterparts.

Unless overall media value is increased, advertisers will continue to withdraw support from advertising, as they have for every year since 1975. If advertisers are not willing to pay increased costs, then media companies must find new ways to reduce their overhead while increasing quality and services. Every citizen of the media community – every television and radio program, every magazine, every newspaper section, every billboard, and every website – must operate at a profit. Losses at any level, except in an investment mode, cannot be tolerated. The media business must emphasize cost management, in order to reduce costs to advertisers while increasing audience size and loyalty.

The future belongs to those companies and individuals that seek and find new and innovative ways to reduce their costs while increasing their quality and their profits. Just as major marketers are developing every-day-low-cost strategies in a basic restructuring of their business philosophies, so must the media industry respond to advertisers' needs for assurances of media efficiency.

This commentary was originally written and published by Jack Myers in his 1993 book, Adbashing: Surviving the Attacks on Advertising. To order a copy visit www.MyersReport.com

To communicate with or to be contacted by the executives and/or companies mentioned in this column, link to the JackMyers Connection Hotline.

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This post originally appeared at JackMyers.com.

Jack Myers consults with media companies, agencies and marketers on business development strategies and financial management. He can be contacted at jm@jackmyers.com