The Price Squeeze Pressure on Digital Explained by Advertising Guru Sunil Gupta

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Digital-Pricing

Digital is no different from any other agency type in facing pressures from procurement to cut margins and come up with ‘the best possible price’ to the client. Digital advertising, as any other advertising, is seen by some as a commodity – the lowest price offer wins. This, of course, has an impact on the quality of work offered and on the client/agency relationship. The agency struggles to afford the staffing levels it would wish to offer the best possible service to the client.

This, of course, has an impact on the quality of work offered and on the client / agency relationship. The agency struggles to afford the staffing levels it would wish to offer the best possible service to the client.

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This pressure is increasingly familiar to all agency types, but there is an additional area where Digital is especially impacted. Digital is an eminently measurable form of advertising – results (even more than in other areas) are pored over, tabulated, and discussed.

The rate paid per click through is gospel. The lower this rate the more procurement salivates.

And it is, of course, not just the basic click through rate that excites – it is the click through rate that includes all the agency costs… management, account handling, planning, and creative.

The more these can be trimmed, the ‘happier’ the client (or parts of the client) will often be. But, and it’s a very big but, at what price to the promoted brand? And at what price to the open and honest relationship between client and agency?

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Distinct and ‘great’ creative can engage with a customer in a way that is very difficult for commodity creative to do. It can build the brand and loyalty to the brand. But the working methodology that leads to great creative is inevitably more expensive than the working methodology that leads to commodity creative.

There will not be as many of the meetings that spark ideas. The client and the agency will not sit down as often to discuss and debate the brand values – and thus, build the relationship which is so key to real success.

A price-driven Digital relationship is, as any other price-driven advertising relationship, unlikely to produce the best work for the brand. I am not, of course, advocating a return to Mad Men days – but I am asking for a little more understanding of what advertising, and especially Digital, is all about. The long-term health of the brand is more important than saving a few dollars this year.