The Advertising Media Association of South Africa (AMASA) last week held its latest forum in Sandton. A panel of industry experts and thought leaders sat down, at a very well attended gathering, to debate the pros and cons of a zero-based rate card. Michael Bratt attended the event and here’s what went down.
The main focus of the event was around the SABC, who had announced that they were switching to the zero-based rate card method from 1 April 2016. The method means that the SABC will charge only for the base value of its products and services, with its media agency choosing its own percentage commission based on what it thinks its services are worth. Currently the SABC charges the base value of its products and services plus an automatic 16.5% agency commission fee. With the new model media agencies can choose to go higher or lower than the 16.5% for their services based on how much they think it is worth. At the debate the public broadcaster was represented by general manager of business intelligence for the group sales and marketing division, Wanele Mngomezulu. He cited two main reasons for the shift to the new model. “Externally there are a host of issues around the Competition Commission and internally the way the SABC’s numbers are reported to the Auditor General, it would make it easier.”
Mngomezulu, however, stressed that the SABC is not trying to standardise the industry as a whole with a zero-based rate card model, but had chosen to take this route for its own benefit.
One of the other speakers on the panel, however, believes that standardising the industry may be the way to go. Derek Sims of Group M said, “If it’s common across the whole supply base of media in the country then we are fine with it. The change will cause a lot of confusion and administration issues if it is not standardised across the whole industry.”
He went on to say that if the SABC goes it alone then that could become quite a big issue. His company represents a group of media agencies who buy a lot of media in the market, dealing with around 900 suppliers. Sims concluded that he was at the event to try and understand the issue of zero-based rate card model better and he didn’t really understand the business reasoning behind switching to it.
Paul Middleton from Ebony & Ivory was also a part of the discussion and his company has firmly made up its mind about what rate card model to use. He said that at the moment most agencies work like a ladder, with a very linear and organised structure. He went on to explain that Ebony & Ivory uses both a zero-based rate card model as well as the opposite one, depending on the contract.
“The old model is not broken. In the past we focused on servicing the quality of the output, price didn’t factor into it. You need to design exactly what you want to do, decide exactly who you are, position yourself there and act smartly,” he said. Middleton also advised that a business needs to be agile and have multiple revenue streams. “I will walk away from nine out of 10 pitches because they don’t fit my business,” he said.
The final panelist was Provantage’s Jacques Du Preez. Speaking from the point of a participant in the out of home industry, he highlighted some of the difficulties that media agencies are currently facing.
“Their margins are eroding more and more and their clients are expecting more and more from them.” He says he believes a zero-based rate card should be the industry standard but, “it’s a bit all over the place at the moment”. Du Preez also made a bold prediction about the future of media agencies. “They don’t have the time or resources to represent OOH products and services properly. If I was a media agent I would revert to easier type of buying opportunities like TV and radio. In a few years, I predict, companies will start employing media planners to subsidise media agencies.”
The debate’s facilitator Gordon Patterson also raised some interesting points. He asked whether the logistics for admin of a zero-based rate card had been thought through enough. He also said, “If the only benefit of it is perceived transparency I would say that is mischievous. Let’s not rearrange the deck chairs just for the sake of it. It has to have a practical benefit.”
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