Why your low advertising print cost does not necessarily mean great value
March 27, 2012
When talking with many procurement and sourcing professionals about marketing procurement, one the the first areas they review is Business Printing, which includes advertising and marketing related printing. It is seen as the low hanging fruit and an area for significant cost reductions.
The fact is that the print industry has undergone many years of competitive cost reduction with advertisers negotiating low prices on their printing costs. The problem is that most people associate printing prices with the cost of putting ink (or toner) on paper. Yet this is only a fraction of the real cost of business printing to any organization.
The most tangible cost associated with printing is the cost from the printer. It often appears in one lump sum making it visible and often easy to benchmark and compare. But consider that the print process does not begin and end with the printer, but commences when you identify the need to communicate using print, and continues beyond when that printed item is delivered to the intended target audience.
In 1997, CAP Ventures looked at the costs associated with business print communications in the USA and identified that less than 15% of the total print cost is spent on placing ink on paper.
Make cuts where there is more to cut
So what is the other 85%? Well there is content research, creation, design, layout preparation before you even get to the printing press. Then following the print process there is warehousing and storage, distribution, archiving and the greatest cost – obsolescence and waste. (After all, who does not have boxes of print material sitting in an office or storeroom somewhere collecting dust?)
So while many print buyers are shopping around looking for the lowest print price, they are often overlooking the bigger opportunity of creating cost efficiencies and savings in the 85% of costs not associated with printing. Often these cost black holes are sitting right under their noses.
Realising the real savings starts with the real costs
To identify where you can make real savings in your total print production costs, consider the following questions:
1. Does your briefing process, or lack of it, add significant cost to your printing?
2. What management tools do you have for collating and storing content?
3. How time and cost efficient is your design and artwork approval process?
4. What processes do you have for managing and minimising print inventory?
5. How cost effective is your warehousing and distribution systems?
6. Is your archival system adding value or just a graveyard for old materials?
We have worked with many of our clients providing the insights, expertise and knowledge to achieve significant savings across your total print production process from improved briefing to reduced obsolescence. Even in situations where they had already achieved the lowest print prices available, we are able to help achieve greater time efficiencies and increased cost effectiveness in the other 85% of their printing cost.
Rather than focusing on the obvious low hanging fruit we are able to show them how to fish were the fish are, in a classic mixed metaphor.
Why at a time of massive marketing change you need to consider alternative strategies
March 25, 2012
Every marketer is coming to grips with the current rapid advances in technology and associated social changes. But does the statement, “We’ve always done it that way” ring any bells?
Here is a story about how this philosophy or approach can impact even the most basic or the most sophisticated strategies.
The US standard railroad gauge (distance between the rails) is 4 feet, 8.5 inches. That’s an exceedingly odd number.
Why was that gauge used?
Because that’s the way they built them in England, and English expatriates built the US Railroads.
Why did the English build them like that?
Because the first rail lines were built by the same people who built the pre-railroad tramways, and that’s the gauge they used.
Why did “they” use that gauge then?
Because the people who built the tramways used the same jigs and tools that they used for building wagons, which used that wheel spacing.
Okay! Why did the wagons have that particular odd wheel spacing?
Well, if they tried to use any other spacing, the wagon wheels would break on some of the old, long distance roads in England, because that’s the spacing of the wheel ruts.
So who built those old rutted roads?
Imperial Rome built the first long distance roads in Europe (and England) for their legions. The roads have been used ever since.
And the ruts in the roads?
Roman war chariots formed the initial ruts, which everyone else had to match for fear of destroying their wagon wheels. Since the chariots were made for Imperial Rome, they were all alike in the matter of wheel spacing. The United States standard railroad gauge of 4 feet, 8.5 inches is derived from the original specifications for an Imperial Roman war chariot. And bureaucracies live forever.
So the next time you are handed a specification and wonder what horse’s ass came up with it, you may be exactly right, because the Imperial Roman army chariots were made just wide enough to accommodate the back ends of two war horses.
Now the twist to the story
When you see a Space Shuttle sitting on its launch pad, there are two big booster rockets attached to the sides of the main fuel tank. These are solid rocket boosters, or SRBs. The SRBs are made by Thiokol at their factory at Utah.
The engineers who designed the SRBs would have preferred to make them a bit fatter, but the SRBs had to be shipped by train from the factory to the launch site. The railroad line from the factory happens to run through a tunnel in the mountains. The SRBs had to fit through that tunnel. The tunnel is slightly wider than the railroad track, and the railroad track, as you now know, is about as wide as two horses’ behinds. So, a major Space Shuttle design feature of what is arguably the world’s most advanced transportation system was determined over two thousand years ago by the width of a horse’s ass…. and you thought being a HORSE’S ASS wasn’t important!
What practices are you holding on to that could be stopping you advancing your strategy?
How to calculate the agency head hours required to deliver your scope of work
March 22, 2012
Many remuneration agreements, be they project fees or retainers, are based on the head hour resources required to undertake the task multiplied by an overhead and profit factor.
But one of the key issues is setting a realistic scope of work and then guessing, predicting or even better, accurately calculating the human resources required.
We developed this methodology and refined the process to create the TrinityP3 Scope Monitor and Scope Calculator. This has been picked by TBWA and developed specifically for their clients in a model they call the Scope Manager.
Setting the baseline
The most effective model for developing resources against a quantified scope of work is setting the previous year as the baseline. The number of projects for that year and the number and type of head hours and associated costs are a known quantity. Accepting that the head hours are correct, this becomes the baseline from which the following years’ scope of work is compared.
Setting the scope of work
Predicting the advertising activity for some advertisers is easy and part of their normal budget planning. But for other advertisers it is much more difficult, with the need to react to the market place or difficult trading conditions making predictions for the coming year largely inaccurate.
If you cannot accurately set the scope of work then you may be locked into a retainer that is too high or too low. Either way it becomes expensive with you paying too much or not paying enough to maintain the relationship with the agency.
Adjusting the head hours
Some advertisers have opted for a system of an adjustable retainer based on the number of projects being undertaken. This method requires the scope of work undertaken to be reviewed either monthly, quarterly or half yearly based on the level of activity to ensure the number of hours does not exceed the amount agreed under the original contract and to adjust the payment accordingly.
The problem with this method is that it relies on the agency keeping accurate and detailed time sheets in the style of law and accounting firms who account for every 15 minutes. This can lead to unwanted disputes over the efficiency and effectiveness of the agency.
Using the industry benchmark
Using the industry benchmarks we have collected over the past 12 years, TrinityP3 has developed a model that can predict the human resources required year on year across account management, strategy, creative, electronic, digital and print production.
Based on creative outputs, such as television, digital, print and radio commercials it allows advertisers and agencies to not only calculate the resources required against the volume and complexity of the scope of work mix, but to measure the impact of changes in the scope of work on the agency resources.
How do you define your scope of work? And more importantly how do use this to calculate the agency resources required?
Adding procurement and purchasing rigour into television advertising production
March 20, 2012
When the agency present “competitive” estimates for the latest television production, are you presented with the three quotes on one page, with the three costs all within 5% to 10% of each other?
Is this familiar?
Does this mean that the competitive tendering process is alive and well, or is it a construct to deliver the appearance of an open tender?
To answer this question, lets look at the underlying influences on the procurement procedure.
The agency producer represents the agency creatives
The agency television producer is responsible for managing the procurement of the film company. But in almost every agency the agency producer reports directly to the creative director, not the account manager or the managing director or the finance director.
The ultimate measure of the agency producer’s ability is ensuring the creative department is happy by delivering the creative outcome, and this usually means the director they want.
The selection of film directors
Why is a particular director / film company the preferred supplier? In most cases the agency creative team have reviewed many directors’ reels and concluded that this director is the right one for this job.
In some cases it is because the creative team or creative director want to work with a particular hot director, or even perhaps because the agency’s art director’s sister is married to one of the film company’s producers.
In a few isolated cases it is because the film company rebates 5% (more or less) back to the agency. But without transparency, one can never really be sure what the real reason is.
The fallacy of the single supplier
When questioning the agency on the reason for the preferred director / production company have you been told they are the only people that can do the job?
Typically it is the creative team and the agency television producer simply pushing their preference. This undermines the concept of competitive tendering and is an insult to the local film production industry and the depth of talent contained within that industry. In every case there are a number of viable options, it is just the agency do not want to explore any of these.
The lack of a transparent tender process
To appease the client some agencies will often provide three quotes by including one or more “check quotes”. These are usually generated by agency-friendly film companies briefed to deliver a quote at a cost designated by the agency.
In return, the film company is promised they will get the inside running on the next job. The next quote, usually the agency’s second choice film company is based upon a ballpark target cost that is higher than the cost supplied to the preferred production company.
No wonder many film companies despair at the inequities of the quote process. In many cases it is only the agency’s preferred supplier that gets the full story including the actual target cost and the key client requirements to pepper into the director’s treatment.
As the client who is actually paying for all this, you would have to feel somewhat compromised by the whole process.
To help our clients through this process we provide estimate assessments and can benchmark production costs, but we also help ensure your agency procurement process is delivering true competitive quotes.
There is so much great talent out there it would be a pity not to utilise it because of poor process.
Creativity is a skill and not magic, genetically inherited, or a blessing from God
March 18, 2012
Marketers will often tell me that they do not care where the big idea comes from. Well it seems it truly can come from anywhere. My colleague and the co-founder of the Marketing FIRST Forum, Dan Hestbaek sent me this article from The Wall Street Journal by Jonah Lehrer titled “How to be creative”
It is well worth reading as it explains the skills that scientists have identified everyone has to be creative.
I found particularly interesting the 10 creative “hacks” as Jonah called them, which are the ways to help unleash your creativity. (How many of these do you see in your agency creative department? Or more importantly how many do you not see in many marketing departments?)
1. Color Me Blue
A 2009 study found that subjects solved twice as many insight puzzles when surrounded by the color blue, since it leads to more relaxed and associative thinking. Red, on other hand, makes people more alert and aware, so it is a better backdrop for solving analytic problems.
2. Get Groggy
According to a study published last month, people at their least alert time of day—think of a night person early in the morning—performed far better on various creative puzzles, sometimes improving their success rate by 50%. Grogginess has creative perks.
3. Daydream Away
Research led by Jonathan Schooler at the University of California, Santa Barbara, has found that people who daydream more score higher on various tests of creativity.
4. Think Like A Child
When subjects are told to imagine themselves as 7-year-olds, they score significantly higher on tests of divergent thinking, such as trying to invent alternative uses for an old car tire.
5. Laugh It Up
When people are exposed to a short video of stand-up comedy, they solve about 20% more insight puzzles.
6. Imagine That You Are Far Away
Research conducted at Indiana University found that people were much better at solving insight puzzles when they were told that the puzzles came from Greece or California, and not from a local lab.
7. Keep It Generic
One way to increase problem-solving ability is to change the verbs used to describe the problem. When the verbs are extremely specific, people think in narrow terms. In contrast, the use of more generic verbs—say, “moving” instead of “driving”—can lead to dramatic increases in the number of problems solved.
8. Work Outside the Box
According to new study, volunteers performed significantly better on a standard test of creativity when they were seated outside a 5-foot-square workspace, perhaps because they internalized the metaphor of thinking outside the box. The lesson? Your cubicle is holding you back.
9. See the World
According to research led by Adam Galinsky, students who have lived abroad were much more likely to solve a classic insight puzzle. Their experience of another culture endowed them with a valuable open-mindedness. This effect also applies to professionals: Fashion-house directors who have lived in many countries produce clothing that their peers rate as far more creative.
10. Move to a Metropolis
Physicists at the Santa Fe Institute have found that moving from a small city to one that is twice as large leads inventors to produce, on average, about 15% more patents.
Does anyone have any other recommendations for technique for producing more creative ideas?