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?

Says who?

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.

The bottom-line

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.

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.

Great article. But if you want a more practical manual on how to generate ideas I would highly recommended a book by James Webb Young called “A technique for producing ideas”

Does anyone have any other recommendations for technique for producing more creative ideas?

Increasingly more Australian film companies and agencies are looking off-shore for cost effective shooting locations, such as Eastern Europe, South America, South Africa, Asia and closer to home, New Zealand. But why?

Exchange Rates

While the Australian dollar is high against the major currencies such as the US Dollar, the Pound and the Euro, the cost of producing televisions commercials is more affordable.

The issue for Australian advertisers is that many agencies and film companies will include a contingency for exchange rate fluctuations within their estimates to ensure that they are not exposed to changes during the production.

But likewise, it is important to ensure that either positive change will lead to a refund or the cost is locked in at the time of approval and that the contingency is removed.

Cost Advantages

Many of these markets offer excellent value in two key areas:
1. Crew costs - film crews are consistently lower in cost than local crews and they work longer standard days before overtime is incurred.
2. Talent costs - Both markets have access to a huge pool of talent due to population size. The combination of the current exchange rate and the higher competition means that rates are typically lower than Australian talent (and even New Zealand).

Cost Penalties

The main issues that advertisers should be aware of are:
1. Travel - These locations can be expensive to travel to and so any estimate should clearly state the agency and film company travel costs. Also, do not overlook the advertiser costs if you intend to attend the shoot.
2. Travel Time - Directors and producers will typically charge for travel days to and from the location, above and beyond the shoot days. Likewise, agency supervision hours can be higher due to extended travel time. But in most cases the agency will waiver these additional charges for the opportunity of shooting overseas.
3. Facilitation fees - If using an Australian production company, you will find that they will use a “local” film company in the country of shoot to facilitate the production. This means that the locals organise the shoot and pay the bills locally with a mark up of typically 10% – 15%. Then the film company may apply their own production fee mark up on top of this.

Our Advice
Shooting overseas can be cost effective for shoots with high numbers of talent or a particularly long shoot of 3 days or more. But before approving a shoot overseas, make sure:
1. You understand the costs you are paying including any contingencies.
2. The agency identifies where the savings have been achieved over a local production.
3. The agency have explored all local options and that they are comparing like for like.

Of course, for added peace of mind we can review your production costs for any market in the world through our network of consultants in the Marketing FIRST Forum.

Over the summer (Southern hemisphere) I was checking out apps similar to the TrinityP3 Resource Rate Calculator Business App on the iTune App Store and came across this beauty from LBi, one of the hot digital shops (who in late 2011 opened an office in Sydney)

It is called COMA – Cost Of Meeting App. 

THE TEST

I finally got a chance to give it a real life test in a client meeting recently. We were discussing agency remuneration negotiations between the agency and the marketing and procurement team.

There were five people from the client (3 marketers and 2 procurement), eight from the agency (The CEO, CFO, General Manager, Group Account Director and four account management staff). And of course me. 14 in total.

I opened the COMA on my iPhone prior to the meeting, while I was waiting for everyone to arrive (Amazing how it is almost impossible for everyone to get to a meeting on time) and set the parameters. I took a guess at the average hourly rate but with the heavy hitters in the room I think I erred on the low side.

THE RESULTS

When the meeting finally commenced 20 minutes late (I am not telling who was last to arrive, but there was lots of conversation between the account team and procurement. I set the calculator running and an hour and almost five minutes later stopped it as the meeting was winding up.

One meeting. One hour. 14 people. The cost was almost $3,400. Excluding Tax.

Now before you argue that the marketing and procurement team should not be included in the calculation because the only people charging to be there are the agency and me, the consultant, consider this – All of those people in that room are employed to provide a service to the company. All of those people receive a salary and cost the company overhead and contribute to profit.

Therefore the total cost of that meeting is $3,400 + Tax. Excluding travel and waiting time.

THE CHALLENGE

I would recommend everyone go an download the LBi iPhone COMA App from iTune and put your meeting to the test. Work in progress. Internal review meetings. Strategy planning days. Etc. Etc. Etc.

Lets have a competition for the most expensive meeting?

Let me know your COMA results.

Anonymously if you like by direct message on Twitter @trinityp3 and hashtag #COMA

Eight Reasons For Evalu8ing Your Agencies (rather than just survey them)