Rising work volumes and increasing media pricing will boost the cost of procuring integrated advertising services in the next three years
Los Angeles, CA (PRWEB) January 22, 2014
Integrated advertising services have a buyer power score of 3.6 out of 5. Buying integrated advertising services is highly competitive, which disadvantages buyers that wish to work with highly sought-after firms. However, integrated advertising service providers can also offer drastically differing business solutions to meet the same end goal, resulting in more buying flexibility.
Due to the high demand for leading agency and specialized services, profit for advertising agencies is high and is forecast to increase due to heightened demand for services, says IBISWorld analyst Agata Kaczanowska. Rising consumer spending and high corporate profit are driving up purchases of agency services, which is enabling suppliers to charge more. Although pricing from top agencies may be inflexible, there are many advertising agencies to choose from. Yet, all agencies must compete for advertising spots on a limited number of advertising platforms, which can be a major price determinant. As demand from media buyers rises, the prices that agencies must pay for advertising spots will rise; these costs are passed on directly to the buyer. Also, consolidation among the top advertising agencies is expected to weaken buyer power in the next three years by limiting the number of available suppliers. Nonetheless, the price range for integrated advertising services is wide, even among the leading agencies. This factor favors buyers that are negotiating with several suppliers. Top firms in the market include MDC Partners Inc., Richards Group Inc., Wieden & Kennedy and Havas SA.
Also, buyer power is expected to strengthen as new audience measurements are developed, especially for advertising campaigns involving digital media. New measurements of success also diversify agency pricing models and, therefore, can make it hard for buyers to directly compare bids from competitive agencies. As a result, buyers are shifting toward more project-based integrated advertising services, continues Kaczanowska. Campaigns can involve just a couple or even hundreds of staff from the advertising agency, and their level of experience will depend on the size and scope of each project. As a result, the estimate of project hours is the largest determinant of the blended hourly rate, with larger projects typically billed at lower rates because an agency is committed to working on them longer term. As a result, developing longer-term business contracts with larger agencies can boost buyer power and potentially result in cost savings for future campaigns. Cost savings, both from the buyer and agency perspective, stem from a developed working relationship and building on previously developed ideas. Agency staffing requirements can often be lowered through such collaboration. For example, buyers can have in-house staff working on advertising campaigns with an agency to reduce agency hours and fees.
The scope of the campaign involves targeting an audience, which may be more expensive or cheaper to reach. The extent of the audience reach, the types of media used and the frequency of advertisements also dictate the intensity of integrated advertising agency involvement and therefore strongly affects price. More advertisements and a longer campaign can also lead to more service requirements for a campaign. These extra costs, such as media buying or creative services outsourcing, are often billed to the buyer with an agency markup that does not usually exceed 25.0%. To sweeten the deal for buyers, agencies typically absorb the travel and entertainment costs they incur when working with a client. For more information, visit IBISWorld’s Integrated Advertising Services procurement research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of integrated advertising services. Advertising agencies included in this report are generally one-stop shops for companies looking to develop and implement advertising campaigns in a variety of media, from basic conceptualization and design to media placement.
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
Vendor Financial Benchmarks
Buying Lead Time
Key RFP Elements
Buyer Power Factors
About IBISWorld Inc.
IBISWorld is one of the world's leading publishers of business intelligence, specializing in Industry research and Procurement research. Since 1971, IBISWorld has provided thoroughly researched, accurate and current business information. With an extensive online portfolio, valued for its depth and scope, IBISWorld’s procurement research reports equip clients with the insight necessary to make better purchasing decisions, faster. Headquartered in Los Angeles, IBISWorld Procurement serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.