If your creative agency is now digital, and your media agency is digital, your PR agency is digital, your sales promotion company is digital and your digital agency is now digital then where does responsibility for managing your digital and online assets reside?

There is a difference between creating advertising collateral such as television commercials and digital and online assets. Most television commercials are created, consumed and discarded, ending up on the advertiser history reel or on the award reel. While online, the opportunity is to have every spend on production become an investment in building and developing on-going assets.

This requires a level of strategic management of these on-line assets. But in this model below, who is best to do this? After all these agencies could and probably do claim digital capabilities, but who is best positioned to manage the overall on-line investment? Media? Brand strategy? PR? Creative? Or maybe even the marketing or brand team or perhaps their IT department?

The current model most advertisers have in place acknowledges that digital ideas can come from literally anywhere and wherever these ideas come from that is where they are implemented. It creates a highly fragmented approach to the online presence and asset.

Why is this a problem? We have seen time and again the disaster of having multiple agencies managing the online implementation and build.

1. We have found advertisers with websites located and housed on multiple servers and in multiple locations, including one on the server of an agency they had fired three years earlier.
2. Customer data on multiple servers associated with sales promotion micro-sites which lacked the record structure to allow the data to be consolidated into a single database effectively losing years of data collection.
3. An advertiser with multiple brand websites almost all built within different platforms making it difficult to share assets and requiring the agencies to re-create these assets on a project by project basis.
4. A website that needed to be decommissioned soon after completion as the website did not conform to legal and global brand guidelines.

So who should be responsible?

It depends on circumstances such as:

1. The size and complexity of the online investment and strategic requirements – eg. e-commerce, content management, database, mobile, seo, etc
2. How fragmented is the organisation structure with various brands and business units with a requirement to have an “all of business” approach
3. Compliance requirements that require either setting these or aligning to existing technical, legal and brand guidelines

The ideal solution is for all technology strategy and implementation management to be owned by the organisation and specifically by those responsible for the overall technology requirements, to facilitate the integration into the existing infrastructure. This depends on the IT function within the organisation being willing, resourced and experienced in managing technology projects for marketing.

The most common issue here is that the IT function is often under-resourced and inexperienced in dealing with marketing and the strategic requirements being delivered by their external agencies. In this case we have found appointing an external technology management partner that can act as a conduit and facilitator between marketing, IT and the other agencies is an ideal solution. The choice of the right technology management partner is essential.

A technology management partner needs to fulfil some important criteria for success, including:

1. Have experience and understanding of the strategic requirements of marketing (talk fluent marketing)
2. Yet also have expertise and capabilities in and across all of the appropriate IT platforms (talk fluent IT)
3. Have proven and rigorous IT project management and implementation skills (manage types and sizes of projects)
4. Be able to work with your other suppliers and not be or be seen as a direct threat to their roles and responsibilities (talk fluent agency and be friend not foe)
5. Be able to design and implement technology strategies and ideas created by others (not suffer from the “not invented here” syndrome that affects so many agencies)

The type of company this is depends on the needs of the marketing strategy and the skill sets required. We have now advised many of our clients on this strategy and worked with procurement and the essential internal (IT, Sales, Management etc) and external stakeholder (Agencies and other Suppliers) to define the requirements of this strategy and select the appropriate service provider.

Of course the right supplier strategy and structure depends on your marketing requirements. But with online, mobile and other digital becoming the main game for marketing communications and more of the budget moving to this spend category, having the right strategy and structure is becoming increasingly important.

What strategies are working for you?

Obviously there are now more ways of remunerating your agencies than ever before and we work with our clients to assist in finding the best model to suit their needs. But there are some basic steps to take when you are about to enter into an agency remuneration review with your incumbent agencies which can make the process less complicated and protracted.

1. Create a 12-month job cost summary that identifies your advertising and media spend by brand and type. For a new brand or agency, use budget and costs from a similar brand activity as a base.

2. Ask the agency to supply a summary of the key personnel, their position, responsibilities and the current or projected percentage of time they will be assigned to your business.

3. The agency should provide you with a comprehensive schedule of fees, for their internal and external services, to be benchmarked against industry averages.

4. Review the past year’s advertising and media activity and identify projects that ran either over budget or over schedule.

5. Investigate projects with budget over-runs and see how the remuneration agreement could be structured to control these.

6. Review your marketing budget and plans for the coming 12 months noting any changes in level and type of advertising activity.

7. Review the agency human resources in the context of your marketing plan for the coming 12 months and make estimations regarding the level of service required.

8. Review your current contract removing superfluous clauses or adding any new clauses required to reflect your changing needs.

9. Review the various remuneration models available and shortlist those appropriate to your business to be discussed with your agency.

10. Contact TrinityP3 as we can provide you with industry benchmarks in regards to cost, resources and remuneration models so you can make a more informed decision on the remuneration solution to suit your current and future advertising needs.

What problems have you encountered in remuneration negotiations both from an advertiser and agency point of view?

In the 12 years TrinityP3 has been providing training and independent advice to advertisers on production and creative costs, we have found that many of these production blowouts are due to poor supplier management, rather than naked greed on behalf of the suppliers. Of course, this does not mean there are no longer sharks in the advertising waters, it just means armed with knowledge on costs and processes, you are less likely to get attacked, or worse still, eaten alive.

Interestingly, there is another industry, which suffers from the same cost perceptions as the advertising production industry and that is the building industry. By way of demonstration, let’s use the building industry as a metaphor for advertising production. Both advertising and the building industry have a creative / design element, in both cases the production is undertaken by a third supplier under the direction of the designer and in both cases the client ends up paying more than they allowed.

In this scenario the architect represents the advertising agency or design company. The builders are the production houses in film and print and the subcontractors are the smaller suppliers such as photographers and the like.

Lets proceed step-by-step through a production to see where the parallels exist and to identify the ways to reduce the overall cost of the project.

1. I need you to design a house for me.

Imagine you call an architect and asked him to design a house for you. That’s it. You need a house. Now no-one is silly enough to do that, because apart from defining what you want the house to do, you would also set some limitations on the design such as cost, size etc.

But many times, agencies have been briefed with as much information as ‘design me an ad’.

So first off, you need a brief. It has to be written. The brief should prescribe all elements that are required – emotional, rational, practical and functional. But more importantly, it should contain all of the constraints the creative team needs to operate inside such as cost, duration / size, tone of voice, deadline.

Without a written brief, you have no agreed reference point to judge the agency’s solution and hold them accountable if they don’t deliver.

2. Great, can you build it by Monday?

So finally you get the design for your house. It is perfect. But it has taken so long to design, to meet your deadline set weeks ago, you need the house built by Monday and it is 3 pm Friday afternoon.

The fact is “time is money”. You rarely if ever hear of an agency missing a media deadline. But to meet this deadline takes time and or resources and resources cost. The less time you have the greater the premium you will pay. This premium is not always obvious, but it is there.

While retailers traditionally work on tight deadlines this does not mean you should not have an annual plan and have the agency working ahead of this plan. While the details may be confirmed at the last minute, at least the concept development and the production planning can occur ahead of the timeline allowing any efficiency to be realised.

So how much time should be allowed? How much time do you have?

3. Can we get a 2nd quote or a 3rd…?

Having approved the design, the architect gets a builder he knows and recommends to quote your job. The builder comes back with a quote that is 50% over budget. This is the budget the architect agreed to in the brief.

So you ask the architect to get three competitive quotes. The architect says that to get the job done right you need the best builder and you only get what you pay for and if you pay less you will get a cheap job. You insist and they get two more quotes.

The competitive quotes are all within 10% of the original quote, so you could end up paying 40% – 60% over your original budget. What are the options?

Call the architect to account to deliver a design that meets the brief, including the budget. Or lower your expectations so costs can be saved. Or ask for quotes from a range of builders, beyond the select few the architect usually works with. In extreme cases, even consider sourcing your own builder.

How does this relate to advertising? Do we need to say anymore?

4. It’s more than we thought, can you explain what these costs are?

The architect presents the quotes to you, neatly printed out on his letterhead, with the major cost centres broken down, like carpentry, bricklaying, plumbing etc. Of course, you could approve the estimate, or you could ask to see the breakdown of each of these cost centres.

You can ask for the breakdowns, but do you have the knowledge to make any meaningful interpretation of these? Very few of us are plumbers or carpenters or electricians. So how are we going to know what is needed and what the industry costs are for these services and materials?

In advertising it is even more difficult. Over time and with experience you can pick up the average charges for various services, but production is constantly impacted with new technology, which affects cost structures and rates.

If the knowledge does not exist within your organisation, then you should source the knowledge from third party suppliers, preferably independent suppliers, to provide a check. (See point ten)

5. Do we really need marble instead of granite?

Having analysed the costs involved, the next step is to identify what costs are essential and what are not. The architect will tell you they are all essential, otherwise they would not be included. But the architect has a creative agenda that is not necessarily related to cost control.

For instance, would a granite bench top, which is more durable and half the price of the recommended marble top, affect the functionality or even the aesthetics of the kitchen?

The same conversations can be had with the agency in relation to costs. What is the cost implication in regards to choosing a particular stock for printing, and is a cost effective alternative available? Instead of shooting on 35 mm film can we shoot the television commercial on 16 mm film or digital video? What is the impact of shooting that catalogue digitally rather than on film?

In every advertising production, be it print or electronic, there are a large number of variables, each with a cost implication. To assume that each of these has been considered before being recommended would be to assume that the agency is driven by delivering the best solution possible, not just the most creative. After all, their job is to provide the creativity to your advertising. It is your job to ensure this is achieved as cost effectively as possible.

6. What if I we source these items ourselves?

In the building trade they are known as prime cost items. These are all the major purchases that the builder passes on at “cost”. Supplying a list of the prime cost items in the quote means you have an opportunity to source these costs yourself and potentially achieve savings.

In regards to advertising, it is harder to identify the prime cost items. One of the most obvious is printing. Most advertisers are sourcing their own printing to avoid the commission or mark-up agencies place on this cost.

It is not just printing, technology has made many of the production processes traditionally managed by agencies more accessible and therefore more competitive. Pre-press, page make up, digital asset management, retouching, material dispatch are all services that can either be performed in-house with a computer and a suitable operator or outsourced at a rate, usually more competitive than traditional agency price structures.

Outsourcing services also means you have opportunities to achieve the same economies with suppliers the agencies achieve, but in this case those savings are returned to you.

7. Well, if it’s just a contingency, we’ll get it back won’t we?

Contingencies don’t happen with new homes as much as with renovations. With renovations there is an unknown element (the state of the existing building) that has to be allowed for in the estimate.

With advertising, always assume you are renovating. If there is not a contingency in the photography, there will be in the printing, or the casting, talent fees, Film Company or postproduction. The problem with contingencies is not the ones you can see, but the ones you don’t even know are there. The hidden contingency.

If you don’t know it is there, how can you ever hope to get it back if it is not used? What these fees should be called is mark up, because almost no one ever gets them back unless you are willing to audit your agency or other creative suppliers.

The most common system, fixed quotes, is not the best system – unless the quotes are detailed and transparent and you have the expertise to assess the quotes. (See point four) If not, then the best system is cost plus where the actual cost plus an agreed margin is charged to actuals not to estimate. Where you have the right to audit the costs to ensure you only pay for what you get. And where you know how much your agency is making.

8. We’ll get planning approval once the job is finished, okay?

So the builder has completed the house and you call the council to get planning and building permits. It really sounds idiotic, doesn’t it? But compare this to the advertisers that took a finished advertisement to show the general manager for the first time and ask their approval.

If you are managing a large number of stakeholders, then make sure they are part of the approval process throughout the process, not just at the end. A client had shot a television commercial and asked if the lead talent could be changed without re-shooting the spot. Why? Because the managing director didn’t like the talent selected.

Ultimately, you want to minimise the number of approval stages by having all stakeholders approve stages before providing feedback to the agency. In this way you reduce the number of changes and therefore the cost.

9. What do you mean extras, I didn’t approve any extras?

The extras are where builders can really make their money. They quote competitively to get the job, but then charge full rates whenever you change your mind.

It is the same with advertising. (The difference with building is that in advertising not every project is put out to competitive tender). But one similarity is how changes to the brief always lead to significant additional costs.

There are two ways to manage this. Firstly, every time there is a need for a change that incurs additional costs, have the change estimated and approved before the cost is incurred. Secondly, don’t make any changes.

Of course there will be people who say there is never time to get the estimate done and approved during the production process. (For those people see point one.) We had one client who took pride in having the lowest agency and production rates around. When we did an audit on their productions we found they incurred up to 75% additional costs in extras and changes, incurred and approved in the heat of production.

10. Contact TrinityP3 to provide you with an independent assessment of your production processes and costs.

TrinityP3 provides advertisers with knowledge, advice and training on television, digital, and print production processes and costs. We have industry average benchmarks for all costs involved in the creative production process.

Music is a powerful communication tool, yet many agencies and marketers relegate it to the soundtrack of television commercials. Increasingly marketers are embracing the power of music to engage their audiences and to build communities around the brand. But here are some tips on how to get greater value from music in your marketing.

1. Make sure you have the right concept for your brand first, as this is the most important element of a successful campaign and the artists and/or music you want to associate with your concepts are secondary.

2. Make sure you’re dealing with the right people as the music industry is full of middlemen, agents, brokers and managers who add time and costs to the process and may have different agendas.

VW developed a relationship with the band Wilco beyond simply providing tracks for their television commericals. 

3. Record companies and music publishers will always encourage you to use their artists exclusively, regardless of whether they are the best act for your brand.

4. Decide, do you pursue superstars or back unknowns? One direction will enhance your brand by association, or you can get involved with emerging young talent (who may become superstars one day) and provide support at the grass roots level.

5. Be flexible with lead times to take advantage of current music trends and emerging talent. Every artist has a writing, recording, promoting, touring life cycle, with more opportune times for your brand during this cycle than others.

6. Consider the merits of working with local Australian artists, instead of international superstars, and trade off between profile and accessibility in this marketplace.

7. Regardless of the ‘promotional value’ your concepts give, the artist’s managers can’t take 15% of ‘promotional value’. But if you can genuinely help sell more music or tickets to events without compromising your objectives use this in the negotiations.

8. Obtain a warranty or indemnity against loss, such as copyright disputes, non-performance and contract infringements, beyond the fee paid and ensure they have sufficient insurance to underwrite the warranty or indemnity, otherwise they are worthless.

9. Music polarises public opinion, with risks and rewards associated with each act or genre of music. Genres such as pop can become old news quickly for young music fans, while genres with older demographics are less fickle.

10. Contact TrinityP3 for advice on dealing with the music industry. There are many rewards for music savvy brands, but also many pitfalls.

How has music worked for you? Or not? Lets us know in the comments below.

Why should advertisers and marketers pay for ideas when agencies have from the dawn of advertising been willing to give away the ideas and increasingly, the resources to conceive them?

For the agency the money has always been in the execution not the conception. In the mid nineteenth century in the US, Commodore J. Walter Thompson and his cronies conceived a business plan to give away the creative concept to secure the media commission and almost a century and a half later when media and content split, the best plan anyone could come up with is a cost recovery model based on resource head hours, overheads and profit margin.

The discounting behaviour Robert Morgan describes (AdNews Sept 15 & Oct 12 2011)  in his peers and colleagues is a traditional discount strategy offering a loss-leader on the most visible component of the negotiation being the retainer. There are a number of strategies to make up this shortfall once engaged, but the most common is the belief the agency will make it up in the production or ‘implementation” where the marketer is approving a more tangible spend.

The poor media agencies have not had this secondary revenue source, as previously most of their revenue was either commission or fees, both relatively transparent, which may explain the explosion in the diversification of services on offer from the media agencies, especially in the content creation category.

Of course, increasingly overseas, major marketers are uncoupling the production and some of the agency networks creating their own separate production solutions to facilitate this, making the agency purely the bait to get the advertisers in the door. Locally more advertisers are looking at bringing the production in-house to realise their own potential savings and increase speed to market.

But back to the concept proposed by the media agencies paying for ideas. Under the current most common agency model agencies are paid by the resource hour. The implication is that the longer it takes to come up with an idea the more expensive it is. So how do you charge for an idea? I ran a workshop last year at Spikes Asia and again in Kuala Lumpur for the 4As looking at how other creative industries value and get paid for ideas.

Almost all recognise the value of the creation in commercial terms being what someone is willing to pay for it or sharing in the revenue or profit it generates. No-one gets paid for an idea just because they have an idea.

There are hundreds and thousands of ideas developed every day and most of them are worthless because no-one is willing to invest in it and if they do then many do not generate the revenue or profit to make it viable.

So unless agencies are willing to either put some skin in the game and be paid in part or full for the value your ideas create, perhaps you should be grateful that someone is willing to pay you for having one and giving you the opportunity to implement it. What you get paid for that is up to you. But in a buyers market be prepared for disappointment.

This appeared as an opinion piece on October 19 2011 in Adnews Australia