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State appointment

The Government gives its verdict

But in the months leading up to the pitch for the £15m account the agency has managed to transform its relationship. It has bolstered its team in Edinburgh, ending criticism that it is farming too much activity into London and somehow managed to deliver the rates it had promised.

And now, to cap it all, MediaCom has managed to confound the critics by holding on to what is one of Scotland's largest single pieces of business - beating arch rival Feather Brooksbank in the process.
Main protagonists

Analysing the dynamics behind this are difficult, because restrictive covenants mean the main protagonists still cannot talk about the pitch. But some in the market repeat the criticism levelled at MediaCom when it first picked up the account three years ago.

"I think it came down to the terms they were able to offer," said one industry player.

"At the end of the day they sharpened their pencil and were very competitive on margin.

"I do not necessarily believe it came down to the rates they were able to buy media at. I believe that over the piece MediaCom and Feather Brooksbank were offering very similar rates - although there would have been fluctuations in some specific areas."

Head of marketing at the Government, Roger Williams is also reluctant to talk about the details - although he did give some insight into the process.

"We chose MediaCom simply because they produced the winning approach, which was looked at not only by ourselves, but other members of the consortium and also by an independent media auditor who we had employed for this excercise.

"Across the board, MediaCom came across as the most competitive and they met the objectives we were looking for."

Pitching is a particular science for media buying points - where very often price is the primary differentiator. There are two ways a buying point can offer more competitive price than a competitor. Either it cuts its own margin. Or simply seeks to buy media at a more competitive rate.

This reality has done much to change the nature of media buying in recent years - and in many ways MediaCom is an example of a new breed of company.

Rather than operating a regional network of well defined, independent companies, it prides itself as behaving as a single company with a range of offices. That is why its UK chief executive Nick Lawson also attended the Government presentation.

Buying power

On one level this one company approach gives the business more buying power, meaning in theory it can use volume to get more competitive rates from media owners. And this critical mass should allow it to trim margins too.

But MediaCom is not alone. In fact most media buying operations are grouping themselves together into larger and larger groups. However, in their race to build volume many believe some media buyers are now offering to buy media for some clients at rates they will never achieve.

One industry inside told The Drum this practice was so common place that it is near universal.

"Some buyers will guarantee to buy cheaper, knowing they can't. But it is deemed to be worth the risk to win the business. Once the account has been secured, they can cement the relationship, persuade the client to buy other media not on the original schedule, pick up spin-off accounts or simply handle the business on a false promise. If they get fired after a year, so be it.

"Others will take on the account as a loss leader. They don't fund the shortfall from their own earnings. But they can perhaps attribute discounts they get because of increased buying power to that specific account. Effectively, high margin clients in the portfolio can subsidise low value accounts."

Nobody is accusing MediaCom of such sharp practice. In fact, many believe the company's achievements have not been properly acknowledged by the market.

There is no doubt that it has enjoyed considerable success, becoming Scotland's largest media buying point, both in terms of staff and billings. It is thought its headcount could touch 50 by the end of the year - so talk of jobs and business moving south look unfounded.

Accounts such as Standard Life, Subway, AutoTrader and the Royal Bank of Scotland look set to fulfil its MD Euan Jarvie's ambition - stated earlier this year - of being the first Scottish agency to break the £100m billings barrier.

Said one client-side fan: "The market may say MediaCom won the Government on price - but the fact is they still won it.

"From what I understand this was a particularly complicated tender, a key part of which was demonstrating that the company had systems in place to manage the eight different clients who are part of this framework contract.

Media costs

"MediaCom will be competitive as far as terms are concerned. But they will also argue that they have managed to create savings in terms of media costs, which are in the region of seven figures, when compared to the previous buying point."

However, many in the industry are concerned that too much emphasis is being put on price - and not enough on service.

"Some media agencies are cutting their own throats by focussing on price all the time," said one commentator. "Proper planning and buying is a process that can add real value; and requires investment. The low-cost culture that exists in the market at the moment is not sustainable."

But away from issues of price, other factors made this pitch notable. For the first time TUPE legislation - which means that if the account had moved, the new agency would have been responsible for the employment undertakings of any Mediacom staff that lost their jobs as a result - was a real issue.

It brings a campaign by the IPA, that wants a change in the law to exempt marketing companies from the TUPE provisions on the grounds it is irrelevant to marketing services, into sharp focus.

Another interesting footnote is the terms of the contract itself. Although it is for three and a half years it is split into three chunks - one of 16 months, followed by two of one year each. This, according to Williams, is to bring future reviews into line with the Governments financial year end. However, others are surprised by the arrangement.

Said a rival media buyer: "This is unusual, although they would have to do something serious to lose this business before the end of the contract. But it no doubt means the pressure will be on to deliver the
rates that have been promised."

Featured by The Drum

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