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.

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?

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.

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

Books for marketers are appearing by people like Seth Godin and Laurence Vincent which instruct the marketer on how to build a company’s brand using stories. But this is only half the story! Everyone is focussed on storytelling while there is huge potential for storylistening.

The power of collecting stories

Marketing professionals have known for some time the power of collecting stories. Dupont collected stories about women’s thoughts on wearing panty hose, and eventually discovered (after first hearing disdain expressed about these garments) that wearing panty hose made women feel more sensual, sexy and attractive to men. Dupont modified its brand image to match these feelings.

Kimberly-Clark collected stories from parents who were toilet training their children, and discovered tremendous stress associated with having children ‘still in nappies’. Pull-ups were introduced, and a new $400 million per year market segment was born.

In both cases the marketeers understood that they were unlikely to discover the telling factors through formal interviews and focus groups. Stories, on the other hand, provided a natural way of expressing what was actually happening. It provided the context required to get at the heart of the issue.

The best form of research is storytelling

Listening to stories is one of the best ways to understand what is happening in a complex and dynamic situation. Analytical methods are great when the issue can be divided into its components but much of life is not that simple. The issues facing marketers involve unpredictable outcomes, ill-defined problems, going with your gut.

Stories help us see the established and emerging patterns from which interventions can be designed. So for marketers there are three skills required to become an effective storylistener:

1. Be able to elicit stories from whoever has relevant stories to tell (customers, staff, stakeholders, shareholders)
2. Be able to make sense of the information contained within and across all the stories collected; and
3. Be able to design interventions that account for the complex nature of the issue being tackled.

Aligning brands with customers

Let’s take the specific example of aligning brand promises with customer service. Companies spend millions on developing a brand image yet this can be significantly eroded if staff misunderstand the brand and deliver contradictory service.

Take this instance of how customer experience contradicts the brand message: ”Dave … saw an ad by Tweeter that emphasized it’s staff’s “boatload of knowledge”. He needed a DVR and walked into a Tweeter HiFi Buys store wanting to take advantage of that knowledge. “Hi, I want to buy a DVR and accessories if someone can show me how to use it.” He was told, “I don’t know how it’s used, but they’re supposed to be really easy.” Dave says, “The boatload of knowledge just capsized.” (Barlow and Stewart 2004: 49)

The role of storytelling in marketing

Imagine this situation being played out in your organisation hundreds, if not thousands of times. The result is a total undermining of your brand position, a position in which you have invested heavily and which you are pinning the future of the company on. In this case you would go out and collect anecdotes from the staff which they think illustrate on and off-brand service.

These stories are then used in a workshop environment to extract the key themes, values and archetypes. The workshop participant (the organisation’s decision-makers) is forced to gain new perspectives and uses the insights to develop interventions designed to improve the brand to customer service alignment.

Narrative is a powerful technique.

So far marketers are only making use of half its power. Become a storylistener as well as a storyteller and reap the rewards. If you want to find out more, we have been working with an Australian based company that is a world leader in storytelling and story listening – Anecdote.

So while the cost penalties for short-term bookings are well documented, media reports of softer markets confound, confuse and frustrate the marketer that plays by the rules. While book your TV early to avoid disappointment remains the catch cry of the vast majority of media agencies wherever you turn there seem to be discounts on offer.

So is this the truth or ‘media fuelled’ fallacy?   Well there is no quick answer. Late commitment can work for some marketers but severely penalise others. It depends very much on what you are trying to achieve and against whom.

The savings when booking early

It is universally accepted that the ‘ideal’ booking window is around thirteen weeks prior to the on air date and that as time shortens, so the premium in cost increases on an almost exponential basis.

Certainly, the pundits agree that a cost premium on CPM of 55-60% is very much the norm in the last week or two prior to activity. But reports of softer markets invariably imply that the best deals are being done now and that those with money still to spend are reaping the rewards of late commitment.

It depends on your audience

The more mass your audience the less defined your parameters of placement the greater potential you have to make the short term work. But in this age of fragmentation, segmentation and accountability, strategies with this level of flexibility are fewer and farther between.

With growing emphasis on ‘quality of engagement’ the importance of being in the right places is key. The more specific a target audience becomes then the smaller the total number of people who will fall into that target. Exacerbating this is that these tightly defined audiences tend to be over-represented in the most popular (highest rating) programs.

Choice of media properties

Famously, years ago one industry sales icon was heard to remark: “We’re in the business of selling s**t airtime, the good stuff sells itself!”

It is hard to believe that premium price inventory remains unsold. If the networks still have it, it is by design and destined to meet the inevitable late requests of a small group of favoured clients.

So in a soft market your average client stands perhaps an even chance of the odd premium spot if they give the network in question a decent slug of the money.

The skill of your media agency

If your media agency has bought ahead of time, they should be monitoring the market and pushing harder as it softens for additional value. If you have programming that is under-performing against expectation your buyer should be moving stuff around and compensating for any loss in value.

What remains questionable is whether perennially ‘understaffed’ media agencies are consistently doing this for their clients. Some have a habit of putting a campaign to bed and moving on to the next.

The secret of buying better

At TrinityP3, we have vast experience in this area and can examine and evaluate the current process in the context of industry best practice or assist in developing a buying process that works to provide the best possible value to meet the strategic requirements.

The traditional TV only model

The brand manager has an advertising budget of lets say $3 million per annum. Each year they spend $500,000 on production and the other $2.5 million dedicated to television media over the year. The production cost is 20% of the media investment.

The fragmented media model

The same brand manager is now following a strategy of using multiple media options to target their audience and create a media multiplier effect to increase the effectiveness of the media investment.

Now he has executions across a number of media including magazines, outdoor, internet, and television. The $3 million budget is now split $800,000 for production and $2.2 million for media.

The ad agency argues that the TV production cost should remain the same or increase. But with a production budget of $500,000 for television, the media investment for television is now only $1.5 million with the other $700,000 across outdoor, magazine and internet.

This means that the production cost for television is now 33% of the media investment and now much higher than their competitors.

The arguments for and against

The agency argues that the same or higher budget is needed to create the cut-through and that a decrease in budget will compromise the creative effectiveness.

Meanwhile the media agency is struggling to deliver the reach and frequency objectives across the duration of the campaign. It could be you end up with a highly creative television execution that your target audience may never see.

The problems with this argument:

1. There is no direct correlation between cost and effectiveness. There is evidence to suggest that creative cut-through increases communication effectiveness, but need not impact production cost.
2. If the media multiplier factor works, then why would you over invest in one medium at the expense of the other media productions and the media investment itself? After all, it only appears to be television production where this is critical.
3. If the audience does not see your message, no amount of creative cut-through will make it work.

The solution

In briefing the creative agency, marketers should be very clear on not just the production budget, but give them the media budget and the marketing objectives this budget is to achieve.

While the budget split of media to production (often termed productive and non-productive expenditure) varies depending on category, brand and strategy, we can provide assessment of budget allocation based on our category benchmarks and we often assist in discussion on investment level.

How do you apportion your budget across the various agencies and outcomes?

Why?

Two main reasons are:

1. Digital media buying, especially SEM / PPC is cost effectively being brought in house for those advertisers whose investment in this area warrants it.
2. There is a growing concern over the lack of transparency in the relationships between media owners and the media agencies that is often difficult to clarify

So should advertisers explore bringing their media agency functions in-house? And what if any should they take on-board?

There are many examples where major advertisers have effectively achieved this by setting up their own media agency or taken the media planning and buying in house. This has been done to provide greater focus and accountability in this area and is achievable when the media spend is significantly large enough to warrant the investment.

At this point it is important to differentiate the two functions provided under most media agency agreements and that are:

1. Media planning or strategy – developing channel and media strategies and plans against specific briefs to achieve media, marketing and business objectives
2. Media buying or trading – implementing those media plans through negotiation, both annual and campaign based, with media owners to achieve the objectives of the media plan.

There are already a number of services being taken in-house outside of media, such as:

1. Social media management, which allows both corporate affairs and marketing to share responsibilities,
2. Paid and natural search as mentioned earlier, as it allows for a dedicated and focused team to manage the category
3. Video and film production to produce the increased quantity of content, especially for online use, quickly and cost effectively
4. Studio and print services for those advertisers who have reasonable volumes to justify the investment.

So could you take media planning and buying services in-house?

The answer is of course, but should you?

There is a high profile regional retailer Harvey Norman who has taken all of their marketing and advertising function in house including media planning and buying. And at the other extreme many small advertisers also manage their planning and buying in-house, especially when they are using a small number of media. There are also quite a number of B2B clients such as pharma-companies who buy their trade or professional media in house because they often have close industry relationships with the media in the category.

The main considerations if considering bringing any services in-house are:

1. Do you have the volume, not just in marketing, but across the whole business? Often there is a duplication of needs in the various areas of the business and these need to be taken into consideration.
2. Does the company have head count limits, which could mean that you are unable to resource the requirements to the levels required? In one situation we saw cuts made to the marketing team to accommodate the “production insourcing”.
3. Can you recruit the expertise from the market and hold them within the structure of the organisation? In the case of community or social network managers, it is often easy to recruit good implementation resources, but much more difficult to retain high quality strategic skills in this space.
4. Will insourcing these skill sets deliver the savings, control, transparency and / or governance you require to justify the initial and on-going investment? Often what looks attractive up front can become unmanageable and costly if not closely managed.

In specific regards to media, there are definitely opportunities for large organisations to take over the management of their media trading. But they need to plan to resource effectively and put in place suitable measures against performance as they would for an agency. In regards to media planning, there is a significant investment required in proprietary media research and the benefit of the cross pollination of ideas and strategies that occurs in media agencies is hard to replicate within a single organisation.

In many ways this reflects the predictions of media agency PHD and their global strategist Mark Holden in “2016: Beyond the Horizon” where they believe technology will be used to make trading more cost and time efficient, while media strategy will be increasingly informed by data and analytics with insights being drawn by highly skilled practitioners.

Clearly, if this is true, the value is in the thinking, which means that the focus of media agency remuneration will need to change from a focus on buying efficiency to strategy effectiveness.

I have always been interested in the perception of misalignment between the CFO and the CMO or between the CEO and the CMO, because I believe, like many marketing professionals, that marketing has an essential role in business performance and success.

But yet again, here is research that indicates that marketing has done a poor job in marketing itself to the financial decision makers within organisations.

A study by Marketing Management Analytics (MMA), found just 7% of CFOs are satisfied with their companies’ ability to measure marketing ROI.

Yet 23% of CMOs think they are “doing a good job of measuring returns”.

Lack of cooperation is also hindering efforts to develop ROI measures.

Just 19% of CFOs reported “full cooperation”.

More than 8% report “frequent conflicts with marketing over budget and strategy”.

And 13% reported “no meaningful relationship at all with Marketing”.

Is the perception real? And what can be done to address this?

How important is it for the CFO and the CMO to be talking the same language?

Let me know your thoughts by leaving a comment.

I pulled out my iPhone and started to show him the TrinityP3 Resource Rate Calculator Business App available from the iTunes App Store.

Taking him through the steps and how to use it, he looked at me and said “I wish I had this to negotiate my pay rises with the CFO at the agency”. Looking at him quizzically, he went on to explain that for the last three years his annual pay review involved the agency management explaining that times were tough and there were no pay rises for him or his staff. A message he begrudgingly passed on to his creative teams.

However, if he had known about the relationship between salary and billable hourly rates he would have realised that him and some of his staff were being billed at multiples of 3 and 4 times based on the billable hours per annum and salary rates.

This provides a great negotiation point when looking for a salary increase. Using the example in the video above:

An overhead and profit multiple of 2.5 and billable hours of 1650 hours per year means that being billed out at $400 per hour means that the annual salary (cost to business including pension / super and package) should be $264,000.

Try out the TrinityP3 Resource Rate Calculator iPhone Business App. It is free and it could earn you a pay rise.

Let me know how you go.

PS: For those without an iPhone the calculators are available here.

It is important that before you even contemplate contacting an agency that you agree on some fundamental processes and issues including:

1. WHAT is the purpose of the review
2. WHAT process you will adopt
3. WHO will manage the process, and
4. WHO will be involved in the decision making

For the purposes of this discussion, lets limit ourselves to the process, but we are happy to discuss all of the issues associated with pitching at any time.

Define your requirements – what are you looking for?

The process you adopt depends on the objective of the review and desired outcome. If, as is often the case with Government Communication Campaigns, the desire is to have a creative strategy and execution to a specific brief, then having a group of short listed agencies respond to the specific brief is a legitimate approach.

But it would be worth considering paying pitch fees to compensate the agencies for their efforts and paying fees if you require the agencies to assign their IP to you whether they are successful of not.

But if, as is more common, you are looking to select and engage a provider who will be engaged over a period of time to work with you to develop innumerable communication solutions to a wide number of briefs, then the ability to respond to a single brief or a number of briefs is not necessarily the best process of selection.

A process of elimination – separate the wheat from the chaff

Of course, there is rarely one criteria on which a service provider is selected, and especially not in an area as complex and diverse as marketing communications. Therefore it seems ridiculous to expect a single selection process such as a traditional tender to effectively sort out the preferred provider from the rest.

It makes more sense to have a series of stages that focuses on evaluating and selecting the preferred providers on specific and discreet criteria. In this way you can cast the net as wide as possible initially and then quickly and efficiently reduce the preferred providers down for more detailed and rigorous evaluation.

At the widest point you would look at agencies that have the reputations and experience in the areas you are looking for and then you would next look at their capabilities in more detail through case studies before evaluating the potential relationship chemistry of each of the agencies with the marketing team. Consider this the John West strategy, in that it is the providers that you reject at each stage that make the ones left the best.

The role of workshops – take the agency for a test drive

While creative pitches are still popular in Europe and the US, increasingly marketers and consultants, aware of their limitations are moving to alternatives. These limitations include the risk of providing confidential information to the agencies, not seeing or knowing who is doing the creative work, concerns over the pitch team not being the people working on your business if the agency is successful and the time and cost of the process.

Instead of using creative to select agencies, they are taking the shortlisted agencies (two or three) for a test drive in a full day strategy planning day workshop.

In this way the marketers can see how the agency thinks, but more importantly identify the valuable thinkers within the team as there is nowhere to hide. See how the agency and the client team work together. Ensure the agency supply the people to the planning day workshop who would be working on their business if successful.

Equally the agency can see how the client thinks, works and communicates and the whole process reinforces the importance of relationship compatibility.

What is the industry best practice?

While there are certainly many mistakes to be avoided, there is not one process considered industry best practice either here or overseas. As stated, the right process depends on the purpose of the review or selection process and the desired outcome.

We have extensive experience managing search and selection projects across all marketing communications including creative and digital agencies, media planning and buying, and marketing services including public relations, direct marketing, event management and the like.

In my experience, while understanding the various methodologies and processes is essential, in most cases we customise the process in some way to suit the needs and circumstances of the client.

In one case we had client-mandated changes as more than 30% to the approved cost of the production and when the brand manager was confronted with the costs they engaged us to assess the proposed costs. In most cases the blowout could have been avoided with some careful planning up front.

Increasing options in media, regions and durations

While this has been an issue for as long as advertising itself, it has recently been exacerbated by the increased number of media channels, the regionalisation and globalisation of markets and advertising, and the fast pace of change in business and marketing, making more and more executions more short-term and disposable.

The increasing time and resource pressure on marketers and their agencies has lead to an increasing number of shortcuts to meet these deadlines, which further impacts this increased complexity.

Time pressures appear to overcome the need for cost consciousness

Of course, cost reduction is no reason to sacrifice creative impact or effectiveness. Just as poor planning and lack of due diligence is no reason to pay more than is required.

But in the pressure to deliver outcomes, due diligence is often overlooked or discounted. This means that instead of looking for the most cost effective way of delivering the outcome, often only the most expedient and invariably the most expensive production process is used.

The need to clearly articulate all your needs and requirements

The best solution is to develop and implement guidelines for campaigns prior to commencing the process. We have found that often in the heat and pace of campaign development, many considerations are overlooked in the shortcuts to meet the deadline and deliver the outcome.

Our recommended guidelines include:

1.  Defining all the media channels to be used for the campaign both short and longer term. This is not just the initial media but also possible longer term uses so that rights can be negotiated up front and paid if and when required.

2.  Defining the media execution required up front in terms of size, duration and number, and have this estimated up front. Invariably the production cost of additional executions after the fact is more expensive than having these produced at the time.

3.  Hold your agency to the defined requirements agreed up front. Once these parameters are established on each and every project, the agency and other creative and production providers must then be engaged to competitively quote and fix the cost and timeline of delivery.

Too many times oversights in the production process lead to cost blowouts that are paid for by the advertiser and not the suppliers.

We see it all the time, advertisers call us in because they are unhappy with the performance and service levels provided by their agency. When we benchmark the agency remuneration, we find they are hopelessly underpaid.

The cost considerations

Many retainers are calculated on a resource, overhead and margin model. This is based on determining a set of dedicated agency resources, taking the direct salary cost of these resources and multiplying this by an overhead factor.

The overhead factor is to cover the indirect salary costs such as support staff like the receptionist and accounts, plus accommodation and utility costs and business development, IT and capital expenses.

This overhead factor can vary from 60% to 120% depending on a number of factors. Then to this cost there is a profit margin of anywhere from 10% to 25%.

Of course if the salary rate is overstated then this adds to profit as the overstated cost is multiplied by the overhead factor and the profit margin. Understated, it cuts into the profit margin. Likewise with the overhead factor and the profit margin.

Paying too much

Many advertisers feel they are paying too much because they have compared their costs with what a colleague is paying. Unfortunately, with the complexity and diversity of remuneration models they are not often comparing like with like.

While overpaying the agency will make the agency senior management happy, it can lead to complacency developing between the agency and the advertiser. After all, the adage that the squeaky wheel gets the oil applies here, and if the agency is achieving a higher than average profitability from the client with little or no extra effort, they can apply less attention to this client over another who is demanding and underpaying the agency.

Paying too little

Paying too little forces the agency management to find ways to increase the profitability of the account.

Typically there are a number of ways to achieve this:

1. Reduce the calibre and number of resources working on the business. By reducing the direct cost of servicing the account you can increase the profit margin. Replacing an account director with a senior account manager can go unnoticed if they have the same title on the business card and thereby save $10K – $15K per annum. This can become self-perpetuating as the staff on the account turn over more frequently due to burn out – having to deliver the same with less.

2. Increase the charges outside the retainer agreement by increasing the number of changes made during the production process to increase production charges on each job thereby increasing the “extraction rate” for that client. If you are underpaying the agency they will need to find a way to increase revenue and manage costs to increase profit.

Pay for the resources or the outcomes

At the end of the day what you actually want is outcomes and results, not just resources. If you just wanted the people, why not employ them directly. The overhead factor will be a lot less.

So if you want to pay for outcomes, firstly you need to define the outcomes you need for any period and the results you want these outcomes to deliver. Then you can strike a retainer or project fee for the agency to deliver the outcome and then a value based remuneration for delivering the results.

This is a value based model that pays the agency a fee for the delivery of the services and outcomes and then provides a significant and variable profit based on the achievement of results.

Getting the formula right

Some advertisers find it difficult to implement a value based model because they think of agency costs in terms of a cost for people. In the TrinityP3 model the agency is paid to deliver the services, but shares in a significant and higher profit margin if they participate in delivering higher than expected results in sales, market share growth or some other significant business measure.

We had undertaken a benchmarking exercise and identified that the briefing and approval process was driving a 15% over resourcing in account management. This represented a $120,000 per year impact on the retainer.

Changes are driven by multiple stakeholders

Most organisations have a collaborative culture, which encourages more people to be involved in each process. This, and a flattened organisational structure means that multiple people of similar authority can be involved in the approval of work as part of the advertising output. The problem is that each approval potentially, and usually, involves a change to the current work. This process works also more effectively if all those involved in the process are working to the same brief (but that is another issue altogether).

Changes to artwork is a revenue bonus for the agency

The issue is that every set of changes can be a bonus revenue opportunity for the agency. While some agencies are on a fixed fee for production, most agencies are on head hour rates for production. In the most extreme case we were asked by an advertiser to investigate their agency’s costs because it cost $7,000 to provide the client’s logo for a balloon printing. What we found is that the size of the logo on the artwork was changed more than 12 times by the six stakeholders involved in the approval process. Each set of changes cost $650 in studio time, plus print outs, pdfs, archiving, etc…

A rigorous process is the secret to minimising production costs

All advertisers should review their approval processes to:

1. Map the current process to ensure it is as direct and rigorous as possible
2. Identify all stakeholders and the role they play in the process (Use the RACI or similar process)
3.  Look at reducing or consolidating the number of stakeholders where possible

Processes can be reinforced by software and online systems

Back to the meeting we had with our client and their agency. Once we had discussed the cost of the approval process we went on to talk to the client about the many online approval systems that help to manage the approval process when you have a large number of stakeholders.

The agency added that they currently used one of these approval systems with some of their other clients. You could hear a pin drop as the client wondered why this had not been offered to them, and lead to a 15% reduction to the retainer they were paying the agency.

Which processes within your organisation are the most time consuming? Let me know, as these are usually the ones with the greatest opportunity for improvement.

But these services we offer at TrinityP3 have proven to be a real money saver for clients:

1. production cost assessments,
2. production cost estimates and
3. production management

Here are two case studies that demonstrate how we have delivered those savings.

Case study 1 – Setting budget expectations

A client, unsure what their production budget should be for an upcoming TVC, asked us to review the proposed creative and estimate the production cost.

Based upon the production spend of their last campaign, the client was considering spending $400K.

However, after consultation with the client, agency and production company, our ballpark estimate came in at $320K. All parties were willing to produce the TVC for this budget.

Prior to this assessment, the agency’s estimate to produce the concept had been $400K , based upon the client’s budget and previous production spends.

Had we not been involved, the agency would have given the production company a target budget of $400K and the budget would have come back to the agency at around this budget.

As the client had already included the production budget of $400K into their overall budget, the subsequent saving of $80K was added to the media spend to achieve better reach and frequency. Based on the cost of the process this was a 30 times ROI.

Case study 2 – Bringing due diligence to supplier selection

A client asked us to review the preferred creative for a campaign and provide a ballpark estimate to set the production budget.

Our analysis was based upon recent exposure to a very similar production and production technique, and the result came in well under the agency’s estimate ($350K) from their preferred production company.

Subsequently, we recommended to the client that the job be put out to competitive tender, as many of Australia’s directors and production houses were capable of the creative and technical requirements for the project.

At the client’s request, we were involved in the tender process, with all the requested production estimates, including the preferred agency supplier, coming in within a 10% variation of our ballpark estimate.

This represented a saving of some $60K and as the agency’s preferred Production Company was able to match its competitors’ they were awarded the job.

The total cost to client for the production assessment and tender management was less than 2% of the production budget and delivered a 17% production saving, representing an 800% ROI.

The figures speak for themselves.

Strategic resources

If you are looking for business or marketing strategy it is better to select a specialist in this area than to expect the communications provider to supply this.

Look for: a clear distinction of the strategic functions they provide; demonstrable strategic performance, probably as case studies; clear demonstrations of consumer insights that led to strategic insights.

People resources

Many providers will have a New Business Team for the pitch, possibly never to be seen again. It is important to identify the resources that will be working on your business short and longer term. While small agencies can be an advantage with access to the most senior people, as the agency grows or if something happens to key staff they may not have the flexibility to manage your business. Likewise, large multinationals may have higher turnover through career development.

Look for: a loyal, long term staffing base (low churn); dedicated resources or guarantees of time and effort by individual name or specific level of seniority/expertise; depth of resource as well as breadth.

Experience/expertise

The conundrum is many advertisers want an agency with recent experience in their category without account conflicts with competitors. While it may be ideal to have a provider with experience in your category, it could be that this comes with a package of set thinking.

Look for: expertise in your category or industry (both historical and current) in a range of individuals; a cohesive team that provides both youthful creativity and mature experience.

Management skills

Agencies are business units in their own right, and managing their own revenue and profit centres requires skill. The experience these management teams bring to the table are critical to your success.

Look for: key personnel who have experience across many industries and categories; managers who have ‘skin in the game’ (hands-on with clients); demonstrably good management skills (strong and consistent agency performance).

Remuneration structure

Remuneration is most often based on a ‘cost plus’ formula that sees the provider remuneration comprised of a salary + overhead + profit calculation based on the advertiser’s needs and expectations. In some cases, advertisers also enjoy a Performance Based Remuneration (PBR) of Value Based Compensation (VBC) aspect that rewards or penalises the agency on performance.

Look for: a flexible remuneration arrangement based on reasonable salary structures, overhead multiples and base profit margin; the willingness to participate in PBR arrangements; demonstration of putting their profit on the line (case studies); a workable review facility that recognises the ebb and flow of budgets and workloads.

Chemistry

One of the most important parts of the relationship between provider and advertiser department is ‘chemistry’ or ‘fit’. Most relationships that do go long-term are based on mutual respect, understanding and consideration.

Look for: a willingness to listen as well as talk; something more than the camaraderie of the new business pitch; a genuine interest in or passion for your business; an open and honest approach that will engender trust and respect.

Size

How big or important do you want your account to be within the agency? Dominating the agency could mean that you end up funding the infrastructure that others benefit from, while being one of the smaller clients may mean that you may be overlooked at times.

Look for: What are the other clients at the agency? Consider both size and type and where you fit in. How demanding are these other clients? Eg. Retail or high volume clients may demand resources to a greater extent than high media spending clients. What impact would the addition of your business have to the agency size?

Location

While some advertisers are happy to source the best provider in the market, no matter where they are located, most require a local supplier. Considering so much of the business is built on relationships, long distance management needs to be considered.

Look for: Does the agency have other long distance clients? How successfully do they manage these relationships? What are the additional costs both in time and money? What are the alternative offerings? How can technology be used to increase interaction and shorten time issues and lower costs?

What other considerations do you use?  Let me know by leaving a comment here.

1. What are the issues affecting negotiation effectiveness?

2. How effective are the advertiser and agency in achieving additional cost efficiencies during each campaign?

TV or not TV?  That is the question .

With most communication strategies based on exhaustive consumer analysis and insights from a plethora of syndicated and bespoke research, a clear understanding of your target’s ‘media imperatives’ is one of the most powerful negotiating tools available.

Understanding how to reach a ‘light TV viewer’ who is also a ‘heavy on-line reader’ might seem obvious, but the essential communication elements of your particular product or service may dictate otherwise.

On one hand, using TV to try and reach consumers who don’t watch much can be inefficient and expensive. On the other hand, trying to explain a complex visual scenario on radio just because your targets listen a lot can be just as ineffective.

Getting the media mix right and the balance between effective and efficient communication channels – both between and within your chosen selection – can have a marked effect on the ability to leverage spend during the negotiating and buying process through more effective channelling of budget.

Is bigger better?

In media negotiating terms, size does count. And not just how big your budget is but also how much clout your media buying agency has overall.

In the typically ‘three-tiered’ process that makes up most major media negotiations, the media agency (or buying group) size sets the first discount off base rate (usually known as the ‘ceiling’ for agency-based advertisers).

Your individual spending volume then comes into play, as the client-specific discount structures are set based on volume or share.

Finally, the actual rate paid on a campaign by campaign basis is the result of the leverage your buying team can exercise on top of these first two discount levels in the context of the current market conditions, lead times, placement strategies and a range of other variables.

One lump or two?

Naturally, negotiating strategy can play a big part in the rate base outcome. One, two or three networks in your TV negotiation? Two contracted and a float? Specific target, specific need – one network? Newspapers by masthead or by publisher? Magazines likewise? Do you know your high, low and walk away positions?

Having an agreed negotiating strategy, the courage to stick to it and a good team in support can make all the difference between a great outcome and a bad feeling in the pit of your gut. And remember, in any negotiation, the best result is a win:win!

The power of process

Even with the best team, a great strategy and terrific leverage, the best laid plans can go astray if the basic process rules are forgotten. These rules apply at the macro (doing the annual deal) and micro (campaign by campaign buying) levels.

1. Give the agency and yourself time.

Negotiations don’t need to be protracted but you will need breathing space so both sides can properly consider their positions and come back with well thought out counter offers along the way. Time is particularly critical in the campaign negotiation/buying process where the best spots and/or positions are always the first to go. In the seller’s market that has characterised conditions over the last couple of years, there have been no prizes for coming in late!

2. Make sure the brief is clear, concise and based on as much factual information as possible.

Basic factors like timing, seasonality, distribution and geography are obvious factors in ensuring the negotiation is based on your business plan. Of course, critical factors like target audience are essential elements that must be spot on or you’ll end up wasting your money despite the best of intentions.

3. Make sure that both you and the agency understand and agree what your expectations, goals and objectives are for the negotiation.

Many times, the agency comes back thinking they’ve done a great job, only to find that the client’s expectations were based on issues only partly communicated and understood.

This brief review only scratches the surface of rate negotiation effectiveness. We have been providing advertisers with a benchmark report on how their negotiated media rate compares to the industry rate across the main media for the past ten years. But more importantly we benchmark how effective you and the agency are in capitalising on this rate as it is applied to your campaign activity.

They posted a blog

For those who don’t know @threeshipsmedia is their twitter account.

It was posted on Instagram

As you can see, in plain and quite amusing language, using donut examples, it explains the different types of social media.

And it has gone viral.

More than 100,000 people have liked it on Facebook.

And thousands have retweeted it in a few days.

Take a look at these other stats for content that went viral -

The Old Spice Ad: 39 million views, 45,000 comments, 141,000 likes.

Or Double Rainbow: 32 million views, 139,000 comments, 151,000 likes.

This Ford Fiesta campaign resulted in: 5 million social media shares, 11,000 videos and 50,000 people said they wanted to know more about the Fiesta when it came out. 97% of these people didn’t currently drive a Ford.

A Southwest Airlines / Make a Wish Facebook campaign resulted in 1 million new Facebook fans for Southwest Airlines.

And this one from the 2012 Super Bowl – The Dog Strikes Back for Volkswagen: The biggest viral ad from the Super Bowl so far – 8 million views, 25,000 likes, countless embeds on websites and blogs, huge numbers of shares through Facebook, Twitter and other social media channels and all this in a matter of days!

Okay everyone, back to work.

In television production, the delivery of quality is a subjective and often nebulous concept and one that is often used to drive up the cost of production with negligible improvement in value.

There have been numerous examples of where budgets have had the latest, and therefore the most expensive camera equipment, where a suitable less expensive version was available. Like the director who wanted the latest high speed film camera to shoot talking heads to camera in a studio. Or the producer who loaded the quote, but presumably not the truck, with every lens available. Or the director who still insists on shooting film and then allows stock shoot ratios of 500:1.

So here are a few ways to ensure your budget delivers every cent in quality on the screen.

Defining quality

In many discussions about production quality, the production house will justify costs with the comment “Doesn’t your client demand the very best”.

This retort usually ends the conversation as the implication is that every production needs to be the highest quality.   For the production house the measure of quality is not the effectiveness of the execution in achieving the marketing objectives, it is achieving the highest possible production values, which means using the latest technology, embracing the latest techniques, allowing time to experiment, being able to cover multiple shoot options as insurance if one of these “new” techniques fail and having the latest equipment.

What they are really saying is “Doesn’t your client demand the very latest and therefore most expensive”. The answer to this should not automatically be yes, because each of these is adding cost, but is it adding value?

A culture of spending

There seems to be a culture within the TV production industry of using (and using the client’s money to pay for) the latest equipment and/or technology whether it’s required or not.

The people that benefit from this culture of “the latest” are the equipment hire facility who hire out the top of the line stuff, the production house who get to mark up the top of the line stuff and the technicians who get to use the top of the line stuff. So there is a strong lobby to maintain this culture.

The knowledge to know better

Some agencies are often complicit in this culture as often agency personnel don’t fully understand some of the technical aspects of production and post-production – whether there is actually any “value add”.

When confronted with the question “Doesn’t your client expect the very best” they have to nod in agreement, and are often coerced into using high-end hardware to keep the director and production company happy, and is in many cases, over and above their client’s expectations and needs.

The expansion of this culture relies on the client’s and sometimes the agency’s ignorance and production pre-ambles full of esoteric jargon and unfathomable technical terms.

So how do you discourage this culture?  By having someone “on-side” that:

1. understands the technical aspects of production
2. understands the jargon and who is not intimidated by the technical gobbledygook
3. asks the right questions at the right time on the client’s (and by default the agency’s) behalf.

Instead of simply advising clients on their production costs we manage their production costs for them. After all, the director has his producer to look after the interests of the production company. The Creative Director has the agency producer to look after the interests of the agency. So why shouldn’t the advertiser have a producer to look after the interests of the client.

It is very common in North America and Europe and is becoming increasingly so here.

Thoughts?

Yet these media billing measures are irrelevant and misleading when discussing the size of accounts or the size of creative agencies. So why, when there are more relevant measures in the industry, are the media still obsessed by media billings?

Media billings

Before the dismantling of media accreditation, advertising agencies provided media and creative services and were largely remunerated on a combination of media commission of 10% and a service fee of 7.5%.

Therefore when discussing agency remuneration or the value of a particular advertising account the media billings was an indication of not only the total turnover for the agency, but also the revenue based on the “standard” commission and fee.

Of course, even in those times, the advertising industry, like the movie industry, was prone to exaggerating budgets as a way of talking up the significance of a win. Or deflating the billings to deflate the significance of a loss.

Non-media billings

Before the dismantling of the media accreditation system, there was a move away from the mark up for print and electronic production. Retail clients were the first to start remunerating their agencies on page rates for catalogues instead of the costs plus mark up.

In fact one prominent retail agency at the time generated more revenue from catalogue production than they did from media. When asked to provide their billings they would take their print revenue and multiply it by 5.7 times to project it as media billings and then add it to their actual media billings.

Therefore a media budget of $10 million and a print production budget of $2 million would multiply up to be $24 million in billings. Or what about a direct marketing client who spends $10 million on direct marketing and less than a million on media, and is declared to have media billings of $58 million?

Misleading the market and themselves

How many times have you read in the trade press where an account moves from one agency to the next and the incumbent declares a significantly smaller loss than the winner declares as their gain.

Or how many times do you read that an account is worth millions of dollars in media billings when the AdEx media spend for that brand is significantly less.

Now most advertisers would prefer that no-one knows the financial details of their activities. But this doesn’t stop the advertising agencies and the media obsessing about it, even though it rarely reflects reality. In fact some people have made a career doing little more than counting these billing wins and losses.

Retainer based on resources

Today most agencies, media included, are remunerated on resource or direct salary costs, multiplied by overhead and a profit margin rather than the budget or spend.

Perhaps a better measure of an account size is the number of resources of FTEs? (Full time equivalents).  This is a direct measure of the costs and complexity of an account and their advertising. That’s why when negotiating an agency contract we spend so much time and effort getting the resources and associated costs right.

So if you are interested in knowing how big a particular agency is, don’t ask them about billings, as you never know what you will get. Instead ask about the number of employees. From this you can fairly accurately project their revenue and profitability.

In new business pitches, touting these well developed and attractively presented pieces of software that promise to provide the highly developed and financially optimised solution to your next campaign brief has an almost irresistible allure for many marketers.

Every major agency group has devoted significant expense and expertise on a global basis developing bespoke tools and technology designed to provide their clients with the edge over the competition.

But are these tools just presentation fodder? Are they really applied to your business on a day-to-day, week-to-week basis in order to add value to each and every recommendation?

Tool or Trap?

In many cases, the ability to apply the technology relies heavily on the availability of raw data to drive the application. Most modelling tools, for instance, require ongoing ad or brand awareness to compare with alternative media lay-downs. No awareness data – no model.

Consumer insight and understanding are the core of most sophisticated recommendations today but unless the appropriate data is available through the syndicated Morgan or Nielsen databases (expensive in their own right on a category basis), it will require access to either bespoke agency data or specially commissioned research to find out anything really useful about your consumer and then apply it to the media consumption for your next campaign.

Cornucopia or plenty of nothing?

Many advertisers are either unaware of the range of technologies available to them or simply unsure of just how the alternatives might apply to their business. Sometimes media agencies like to encourage a little mystery around their expensive proprietary tools because it adds to the perception of their sophistication and the ‘added value’ they bring to the table.

Answering the questions

Based on our many years experience in this area, specialising in reviewing agency process and resources, here are a number of ways of ensuring the agency’s tools are appropriate, available and applied to your business:

1. Seek a comprehensive presentation from the agency outlining all their tools and technology and how they apply it to your business.
2. Make sure any descriptions in this area are clear, delivered in everyday terms and comprehensively illustrated by examples or case studies.
3. Review your own data sources and the media briefs and objectives set for your campaigns and consider if they provide a good basis for a ‘technological’ solution.
4. Make sure that every recommendation the agency makes is accompanied by a rationalisation that clearly describes the tools and data sources used – compare this usage to the ‘menu’ presented in their tools and technology expose.

1. Outcome expectations

Imagine you are building a house. Would you give the architect a budget to work with? Would you outline your expectations in style and function? Or would you just let him go creatively crazy and hang the expense?

Implications

If you brief your agency give them a budget and tell them you want them to stick to it. Tell them all of the objectives you want the commercial to achieve. Tell them all of the ways you are going to use it, where, for how long, and on what media.

Case study

A client gave the agency a $300K budget and a brief to ‘lift creativity’. The agency interpreted that as ‘lift the budget’. Following three months of creative development, concept testing and international approvals, the agency presented a big idea with a cost of over $600K.

2. Making changes

Imagine walking into a house you are having built and telling the builder you want to move a wall here or add a room there. In the building industry these are known as ‘extras’ and are a rich source of profit for the builder.

Implications

The same applies for the television production industry. Once the production commences, (ie after the final pre-production meeting) every change costs you money. If you make changes and it doesn’t cost you money, then you know the agency and/or production company has built plenty of contingency into the cost.

Case study

A client briefed their agency to develop a television campaign and nearing the completion of post-production announced the packaging had changed significantly. The cost of including the new packaging added 20% to the total production cost.

3. Approval Processes

Imagine turning to the builder once the house was finished and saying, “Well. I guess it’s time to get council, electrical, plumbing and planning approval”. Especially when you know most of them will want changes and one may reject the overall plan altogether.

In extreme cases, clients have been known to race to and fro to the agency to make changes as they go through each level of final approval.

Implications

Each set of changes costs money. Worse still, the agency gets to know this is your preferred process, so they hide a cost contingency in to cover it. Either way, you pay big.

Case study

A client negotiated very competitive rates with their agency for their television production. However, in an audit of the tv production costs it was found that the company was paying up to 100% of the original production cost in changes. The agency knew the client’s approval processes were impractical and enjoyed the profits last minute changes brought with every production.

Solution

We have a number of ways to help advertisers achieve maximum value for their television production budget including:

1. Production Training for Advertisers,
2. Benchmark Production Cost Assessments
3. Production Cost Estimates
4. Production Management

What made it interesting was the fact that the client thought of themselves as retailers as they were the customer facing division of a truly vertically integrated business that started with the manufacturer and ended with the customer purchase and installation. But in fact within minutes of meeting with them it was clear they were actually quite a significant direct response business.

At the same time I was in discussions with a retail client who has entered into a customer database loyalty program and e-commerce solution and is having difficulty reconciling the investment in loyalty and Customer Relationship Management (CRM) with their traditional retailing business model based on reach and frequency and co-operative funding.

Here I had a brilliant direct response business (they even managed their own in-bound call centre in house) who thought they were retailers and a retailer who could not understand how to integrate customer relationship management into their retail model.

It was time to help them define, or perhaps re-define, the business they were in and assist them in finding the right tools and resources to deliver against those business models.

Turning off the retail and turning on the direct response

They had been using media, primarily TV, press and some digital to drive reach and frequency against a broad segment of home owners (the product was for the home). The agency was on a traditional media commission based on the fact they had reasoned that if they were successful they would spend more and therefore the agency would do more and therefore should be paid more.

The problem was that the agency found ways to do less as a way to generate more profit from the spend and when leads fell the client invested more media budget trying to generate more leads and in the process was driving up cost per acquisition (CPA).

The first thing we recommended was moving to a DR Media agency with a Value Based Remuneration Model where 100% of the agency fee is based on sales and a bonus for reducing the CPA. In this way the agency was completely aligned to the business objectives of driving sales and reducing costs.

Turning the retail focus from product to customer

Meanwhile over at the retailer, they had millions of dollars invested in a traditional retail media program of catalogues with TV and press support all funded from supplier co-operative advertising dollars. In fact, you would not be surprised if this was actually a profit centre for the business which is common in retailing.

The problem was that while there has been infrastructure funds for the database and the e-commerce platform there was no funding model for the marketing of the same. The agencies on the roster had typically been selected or negotiated to a low cost position, with page rates, minimal retainers and discount hourly rates, to minimise cost and therefore maximise margin on the co-operative funding. There was no funding model for the agencies to activate the CRM and no internal funding beyond the initial investment.

The CRM and e-commerce created an opportunity to appoint and then develop a direct payment model for a database / behavioural marketing agency. This was based on a Value Based Remuneration Model with the agency being paid out of the additional co-operative funds being generated by the addition of new direct response channels in the retail model.

eDM based on database customer analytics generated significantly higher ROI for the retailer and the supplier. The problem now was that the suppliers wanted to move more of their funds from the traditional catalogue driven model, which could threaten the viability of this profit centre.

Retail and Direct Response both benefit from Value Based Agency Remuneration

Traditionally retailers have focused their agency remuneration strategies on cost reduction as a way to minimise cost of business and maximise revenue. But for direct response clients and retailers moving to more accountable CRM models and e-commerce strategies there is an opportunity to achieve greater accountability and alignment with your media, creative and digital agencies using a value based compensation model.

Let us know if you have tried this approach and what issues you had to manage by leaving a comment here.

For regional and global advertisers there are a number of opportunities to uncouple or unbundle production to one of the global production companies like Tag and Freedman International.

But for local clients and international clients looking for delivering efficiencies and savings there is much that can be done on a local market level. But before you race off and start looking at strategic and structural production solutions, it is important to make sure you have got the basics right, which is why I created this presentation on Slideshare.

It is not that surprising the interest in managing production costs. After media, the next biggest advertising expense marketers and advertisers are responsible for is advertising production: –  Television, digital, internet, social media, cinema, newspapers, magazines, outdoor, radio, direct mail and more.

The problem for most advertisers is that this area of expenditure is often shrouded in terminology that is confusing, technical and potentially misleading.

We find that the top 4 reasons marketers end up paying too much for advertising production are:

1. Poor planning
2. Lack of understanding
3. Not enough time allowed
4. Complex and convoluted approval processes

So in the presentation you will find my ten tips for managing advertising production costs more effectively. What are yours?

2012 will be a year of solving the conundrums of marketing complexity. The world sitting in a now familiar state of uncertainty, with debt crisis, stagnant established markets and emerging growth markets, and continued pressure to deliver increasing returns. In the face of this uncertainty and continuing increase in fragmentation and complexity, marketers will need to develop more flexible responses to deal with a range of conundrums.

1. Chasing growth and maintaining share

Global marketers are looking for growth in the emerging markets, often funding this investment at the expense of maintaining or defending their existing markets. The conundrum in 2012 is getting the right balance between the two because under investing in established markets opens opportunities for competitors which could erode the funding required to penetrate the growth markets.

2. Knowing as many customers and as much about them as you can

Customers are no more diverse than before, it is just now they have a voice and power of numbers. Before, marketers could treat them as an amorphous group or segment. But now the individuals within that group can and do connect and share and flex their muscles. The continuing conundrum this year will be how to continue to reach a mass while being able to connect with the individuals within that group in the way they want.

3. Matching, making and managing channels

Everyone talks about owned, bought and earned media. But marketers struggle with getting the balance right. The conundrum appears to be to go for reach with the traditional bought media with little budget for investing in owned and earned, or invest in owned and earned media for greater engagement at the expense of reach. Striking the balance is difficult but in 2012, a “test and learn” strategy will provide the answers.

4. Working globally and locally

The idea of the global village is a reality with universal Internet connectivity. But it is a village of multiple communities and cultural diversity. Global and multi-national marketers are confronted with the conundrum that what they do in one market will be shared across all. Therefore in 2012 there will be an increasing need to have a consistent global strategy with aligned and localised implementation.

5. Having customers “Do” or “Know”

Traditional advertising has been focused on awareness. But following awareness is engagement. “Tell me how” is one thing. “Show me how” is another. But let me “do it for myself” is engagement. The conundrum is how to strike the balance in investment between driving awareness and engagement to meet expectations.

6. Small ideas or a BIG idea

You load up your advertising with the big idea, you aim it at the target audience and you fire. And you keep doing it until you run out of firepower – usually budget. But now fragmented targets require a more granular approach with an on-going “test and learn” process is replacing the old campaign model. The conundrum is that most marketing strategy (and its funding and execution) is campaign driven and so 2012 will be a year of transition.

7. Mobile for reach or engagement

The conundrum is not mobile or not, as any brand wanting to engage customers needs to think mobile (It is the main access to internet in emerging markets). The conundrum is how. With so much opportunity for reach and engagement, too many have failed using the mobile for awareness and there has only been nominal success in brands using mobile for engagement. But in 2012 that will change.

8. Collaboration or alignment?

To embrace complexity requires collaboration both within the organisation and across the organisations engaged. But the conundrum is that collaboration requires alignment. But aligned to what? Corporate objectives? CEO vision? Brand? Sales projections? The customer? The first step to creating collaboration is to agree what is it you are collaborating on and to what outcome. Internal and then external alignment.

9. Who owns digital?

Digital is not just the all-pervasive platform of marketing. It is the same across the whole of the business world. Websites, social media, and other external communications meet internal finance systems, inventory control and logistics. Nowhere is this more obvious than e-commerce. So the conundrum is who owns digital? This year the CMO, CIO and the CFO will become new friends for every company embracing social media and e-commence.

10. Pay for results or value but not costs

Much of the cost of advertising is simply a cost. The cost of media. The cost of agencies. The cost of production. But with the increased pressure on marketing and advertising cost, the conundrum is how do we move from this cost based approach to a value or results based model. It is no longer acceptable to be a cost of business, but for marketing to be an investment, this year we need to stop thinking about costs and start focusing on value and the return on investment.

11. Social media is in-house and out-house

While traditionally many organisations outsource their communications needs to specialist agencies, social media is causing a rethink. In-house or out-house? With the opportunity to engage your customer in a conversation it is not just a marketing channel, but also a customer service tool, a reputation management function and a customer relationship management application. So is it in-house? And if so who owns it? This conundrum needs to be answered this year.

12. Who is responsible for CSR?

The customer is talking about you. And not just your products and services, but the way you manufacture them, the way you treat suppliers and employees, the environment and in fact all aspects of your business. But it is not just another channel to be managed. The conundrum is how do you make Corporate Social Responsibility everyone’s responsibility.

What conundrums are you facing or dealing with at the moment? Why not share them here with a comment and lets see if we can solve them together.

To see this as a guest blog on BizCommunity in South Africa click here.

How often do you brief your agency to provide a TV concept within a given budget, only to have the estimates on the approved concept come in at 5%, 10% or even 50% higher? Or, how often do the estimates come in within a few thousand dollars of each other and within the budget? Does this really equate to the actual cost of the TV production?

What drives TV production costs?

The first driver is the concept itself. There is always a minimum production cost for producing a commercial, but theoretically, there is no upper limit. Often, the agency and film company will arbitrarily continue to add enhancements, contingencies and experimentations into the process, thereby driving up the cost – if there is no set upper limit.

What drives the upper limit is your budget or at least the upper limit of what the agency believes you are prepared to pay. This will be based on either the stated budget, or in the absence of this, previous budgets for similar executions, the level of importance which you assign to the campaign, your level of experience in such matters, and a range of ‘mitigating’ circumstances.

So what’s the solution?

At the outset, set a firm budget – before you brief the agency. This should be calculated based on:

1. The projected ROI
2. The planned media budget for the first year or phase of the campaign
3. The category in which you conduct your business
4. The strategic importance of the particular task

TrinityP3 has comprehensive industry benchmarks for assisting you in setting realistic budgets based on these factors. Having established your budget, you should have your proposed productions cost benchmarked at the concept stage.

Once your agency has responded to the brief with the concepts you are considering for approval, but before investing any more time or money in concept research or testing, contact us and we will provide you with an independent and qualified assessment of the cost of producing one or all creative concepts.

Our quantified and qualified estimates are provided within 48 hours of receiving the creative concepts and normally cost less than 1% of your production budget – a worthwhile  investment in anyone’s language.

But more importantly, it is invaluable in ensuring you have a realistic expectation of the real production costs. It enables you to control costs without compromising the quality or integrity of the concept before final sign off, which results in an avoidance of unforeseen budget overruns once production has commenced.

In short, you know precisely what you’re up for up front and you are able to minimise any unforseen financial variations.

So how can you ensure your pitch process builds the foundations for a solid long-term relationship?

TrinityP3′s top 5 tips on pitching for the long term

1. Have a clear understanding of what you want

What may seem the most obvious is often the most overlooked in the rush to get the pitch progressing.  It is worth really defining what you are asking the agencies to solve now and what briefs you may have after the pitch is over.

2. Plan it more like a test drive than a date or beauty parade

Whilst pitches have roughly had the same format over the years, it is important to determine the level of input you require from your agency after the pitch and build this into the pitch process.  If you require regular strategic input and insights from key staff at the agency including creative teams, we suggest a day long workshop with each of the short listed agencies to ascertain the chemistry not only in personality but in the solving of marketing problems.

3. Who is paying, you or them, because no one wants to split the bill

Regardless how great the creative solutions and how well the chemistry is going, if you don’t ensure you negotiate a framework that allows you to get the service you need at sustainable rates for both your business and the agency, the relationship is likely to fail over discussions that detract from the core business objectives.  It is also important to keep the performance criteria simple enough to be measured.

4. Be clear and up front in what you want and expect

Be clear in how you plan to run the pitch and how you plan to work after the pitch is over.  In any relationship that fails, it’s usually confusion over expectations that are the cause.

5. Be prepared to spend the time to really get to know each other

The average pitch can require 600 – 800 internal head hours.  As you are selecting a partner to help achieve key business goals it is worth allocating the time upfront.  It is also important key decision makers have the time to consider the agencies properly and not get caught up in the administration of the pitch.

These are mine.

What do you suggest?

Leave me your suggestions as a comment here and lets see if we can expand the list to ten!

These issues often became the basis for blog posts throughout the year and it is indicative of the commonality of these issues that the blog posts were widely read and shared.

It is most interesting to see the topics that received the highest reader interest. Below are the top 10 blog posts for 2011 in descending order of readership.

Click the titles or images to read the full post.

10. Advertising agencies can demand to be paid for ideas and resources but where is the value?

This started out as a response to the column Robert Morgan, Chairman of Clemenger BBDO has in AdNews. Agencies talk about the value of ideas but the problem is that often agencies and advertisers have two very different ideas on what is the value of an idea.

9. Top 10 tips for fostering collaborative agency solutions

A call from a client in the dairy industry asking me if I have any practical suggestions on how to foster collaborative relationships between their various agencies. At the start of last year I spoke at ISBA in London on this and presented the ABC of developing collaborative advertising environments, and this became the follow up to that presentation and our client’s request.

8. The right media strategy is more important than the right price

This is something we have been discussing for years. The obsession for many marketers and procurement has been the cost of media. We see media agencies do battle with each other trying to prove they can buy media cheaper than their competitors. But there is a fundamental truth and that is no matter how cheap the media, it is wasted investment if it is strategically wrong. Right?

7. A blueprint for reducing your advertising production costs

There are many metaphors bandied around marketing and advertising, mostly tired old sporting and military ones, but when it comes to production there is much to the said for the comparison to building and construction. For the past 12 years we have been assessing and benchmarking our clients advertising production costs across television, radio, cinema, digital and print. There is a presentation on this you can check out here.

6. 10 tips for renegotiating your agency remuneration

For 18 months I was in irregular discussions with a client who decided that he would handle his annual agency negotiations. He contacted me six months prior to them needing to be finalised, which was a positive sign, but decided that following our discussion he could handle them himself, contrary to my advice. More than  a year later they still were not finalised so I sent him these tips. Obviously many people found them helpful.

5. Defining the scope of advertising agency services to determine agency compensation

I am often surprised by the number of marketers that ask if we could benchmark the level of agency remuneration and have little or no idea what the agency had actually delivered for the fee. It appears that many marketers are challenged by determining and defining the scope of work to be delivered by the agency, so this post helps to do that.

4. Top 10 considerations when selecting a new media agency

There were quite a lot of media agency tenders this year and time and again I found myself advising clients on what they should be considering when selecting a new media agency. I think one of the major issues with media is people often believe they have a clear understanding of media but can find themselves out of their depth on the details.

3. Why your agency may not be your best solution for digital strategy alignment

Investment in digital continues to outgrow all other areas of advertising, yet this year we found that many marketers were still taking a quite traditional view of their digital requirements. Many believed that their existing agencies were best placed to handle their digital needs, driven by the belief that this would “integrate” digital into their marketing strategy. The issue is what is your digital strategy and who is best to manage it?

2. Top 10 Questions to ask a strategic marketing consultant before you engage them

On January 14, 2012, TrinityP3 was 12 years old. Happy birthday to us! Twelve years ago we were the new kids on the block and since that time we have built a reputation for innovative, strategic and professional solutions to increasingly complex marketing management problems. But at a time when every person to be made redundant from an agency appears to hang up a consulting shingle, it was worthwhile defining what questions you should ask. Clearly many people agree.

And coming in at Number 1:

1. The Top 10 Most Common Ways Marketers Waste Money

This was a presentation that I put together for a client a couple of years ago. Early last year I was asked to do a talk for a client about ways of improving advertising process efficiency. I looked up the original presentation and on reviewing it found that highlighting poor performance in getting the basics right was more interesting than simply restating the basics. You can see the whole presentation here on Slideshare or as a video on YouTube.

As you can see, most of the posts come from clients contacting me and discussing issues they may have. So if you have an issue or a problem you want to discuss let me know and  it may well be something many other people are thinking about.

Or if there is something you would like me to write about, leave a comment here.

Who knows, it could make this year’s Top 10.

This opened the conversation beyond simply “who is the right supplier and how do we find and choose them?” to a conversation about “what is the right roster structure to deliver our strategic requirements?”

As a guide and as stimulus for this conversation I use the presentation above outlining the various major roster structures and the relative strengths and weaknesses. The main agency roster structures are:

1. The Full Service Agency
2. Holding Company Model
3. Created Customised Agency
4. Lead Agency
5. Strategic Group
6. Strategic Tier
7. Best of Breed

There is no one correct structure and in fact there are many hybrid models of these structures that all function effectively. The important step is to define the strategic requirements and match the roster to those requirements.

Therefore when the Marketing Director was talking about the major shift they had in mind for the brand beyond simply position, but one that would impact the marketing investment mix and the channels, it was the ideal time to review the overall roster structure to ensure it was aligned to the new strategic marketing requirements.

This approach then made it much easier to then assess if the current supplier structure and mix was aligned, by defining the requirements of the supplier roster strategy. I am a big believer in the strategy of “changing your agency is smarter than changing agencies” and have found that this approach ensures that most of the emotional and subjective drivers for the new Marketing Lead to change agencies are put to one side and a more strategic approach based on the immediate and future requirements of the brand is embraced.

Even if this strategy leads to the incumbents being asked to re-pitch for the business, it is done with clear requirements in place for which they can prove their suitability rather than being led through a process to be rejected for often ill-defined and usually personal reasons.

And I have found a good starting point for this is to review the current roster structure against the various models available.

I would be interested to know if you have worked with a roster structure outside of the ones I have defined here?

And how successful was it?  And under what circumstances?

Let me know in the comments here.

Fixed cost up front?

Under the SPAA contract once the purchase order is issued, you have agreed (by default) to pay a fixed price for a “completed and reasonably acceptable videotape master” of your TVC. (The SPAA contract makes no mention as to whom the master is be “reasonably acceptable” to)

You pay the worst-case scenario?

The SPAA contract goes on to explain that the contract is actually applied to an estimate based upon assumptions, by which the agreed or estimated total is calculated. Now any reasonable person would understand that the production company makes TVCs and is not in the business of gambling. Thus all the production company assumptions would have to be based upon a worst-case scenario. Then the estimate would have to be based upon financial considerations high enough to cover these worst-case scenarios whether they occur or not.

Robbing Peter to pay themselves?

The SPAA contract then goes on to explain that if not all the funds are required as estimated for one particular cost center it is the up to the discretion of the production house to re allocate the excess funds into another cost center should they see fit, or alternatively they can retain these excess funds as profit above and beyond the production house mark up / profit margin.

Make a change and we’ll bill you!

The SPAA contract also outlines the production company’s rights to charge extra should the client or agency alter the specifications of the project. There is no allowance in the SPAA contract for the reimbursement of funds to the client should the change of specifications actually decrease the scope of work required to deliver a completed and reasonably acceptable videotape master. This is a fair indication of the spirit in which the SPAA terms & conditions were drafted.

Plus you never really own the production

The SPAA contract also states that the production house could claim payment if for instance, the client executed a cut down of a TVC that had not been mentioned in the original project specifications. Although this clause is rarely enforced by production houses it is still included in the SPAA contract, once again enforcing the production house bias of the whole contract.

In summary

The SPAA contract is a document from the 80s when the advertising business was awash with cash, when Alan Bond was winning the Americas’ Cup for Australia and Christopher Skase was planning the opening bash for his Queensland resort. Things have moved on since then, unfortunately the SPAA terms & conditions haven’t.

There is a solution

Thankfully there are alternative contracts that can be put into effect that are far more in tune with current industry practices and expectations. But it seems that few agencies are challenging the production companies on the terms of their agreement and binding their clients to these terms by accepting them on their behalf, even when they may have no legal right to do so.

See where the potential legal dispute may arise?

Have you checked what production contracts you or your agency approve?

Internal agency human resources

Like most companies these days, agencies do not have a significant capacity within their human resources for speculative work. While few agencies appoint external staff for a pitch, the head hours invested in the pitch process is a cost to the business, with the majority of the costs quoted for the pitch process comprising these human resource costs.

Disruption to the agency

The opportunity to participate in a pitch can be great for agency morale, but many agency managers are rightly balancing the potential upside of chasing new business opportunities with the impact the disruption may have to existing clients.

Non-recoverable external costs

Depending on the size of the account, many agencies will invest heavily in external costs such as consumer research, animatics, external artwork and the like to provide a perceived competitive advantage. If the agency is unsuccessful, these are hard costs that will never be recovered and even if they are successful, it can take many months to get back to break even.

Intellectual property rights

The core value an agency provides is the ability to generate ideas. In many cases advertisers require the agency to assign the rights to these ideas to the advertiser as part of the pitch process. If you were not intending to use the idea why would you want to own it? And if you do intend to use the idea, why would you not pay for it?

Industry perception of failure

While the successful agency wants to shout their success from the roof tops, the unsuccessful agencies are naturally concerned that a number of unsuccessful pitches can create a perception that the agency is “off the boil” with little or no opportunity of putting these losses into context as they are often covered by confidentiality agreements.

When to pay pitch fees

There are times when you should compensate the participating agencies for their costs. Our advice is to offer pitch fees when:

1. you want to buy the rights to all concepts, not just the winning concept,
2. when you require the agencies to prepare materials and incur external costs beyond what would be considered standard
3. if you are engaging a large number of agencies in the strategy / creative stage of the process.

How much should you pay

That is obviously open to negotiation with the agency. Too little and the fee becomes token and potentially insulting. Too much and you are simply wasting money. But if you are simply paying out of pocket expenses then as a guide $10,000 – $25,000 per agency would be reasonable and if you are buying their intellectual property rights then the commercial value is easily $100,000 +.

Have you ever paid pitch fees? Or been paid pitch fees? And what was the fee for? And how much were you paid?

Leave a comment here. We do not need to know who the companies were. Just the facts.

Thanks.

1. You want to appoint an agency provider for the first time. It may be a new business, new brand or growth in an existing business that now requires a specific external resource such as a media, direct marketing or advertising agency.

2. If the current relationship with the agency is damaged and beyond repair, in which case the incumbent should not be asked to pitch as it is simply a waste of everyone’s time.

3. If there is a regulatory or corporate governance requirement to go to market on regular intervals. However, if this is driven by cost concerns there are much more cost effective ways to determine how the current remuneration compares to the market, such as benchmarking, instead of the long and labor intensive pitch process.

4. If the company or business or marketing strategy is undergoing major directional changes and there is a requirement to expand or change the mix of services being supplied by your current providers.

5. To rationalise large numbers of like suppliers to achieve economies of scale and to assist in supplier management. In this case only existing suppliers on the panel would be asked to participate.

But many people use the review or pitch process for a number of other reasons, involving higher risk and higher costs including…

1. Facilitate fee negotiations – While a competitive environment provides the company with an advantage, the cost and disruption to the existing process and relationship almost never warrants this strategy. There are some advertisers known to change agencies on a regular basis to reduce their costs, but the false economy they are following does not account for the wasted resources consumed each time.

2. Wanting to test your incumbent against the market - The danger of this strategy is that while it allows the advertiser to directly compare the incumbent to others in the market, it can have the effect of damaging the existing relationship over time. Also, because of an imperfection in the review process an advertiser may make a decision to change that they may later regret.

3. To engage a pre-selected preferred supplier – This is deceptive conduct that simply wastes the time and resources of all participants. If there is a clearly preferred supplier, then they should be appointed through a due diligence process, but not under the guise of a fraudulent tender process.

4. Because the love is gone – A common reason advertisers want to change agencies is that the relationship has changed. This is where business and personal relationship counseling collide. When the relationship with a provider is under performing it is important to determine the cause and assess if this can be rectified before terminating the relationship. Only when the relationship cannot be fixed is it time to go to a pitch.

5. To keep all of the agencies on their toes – There are some marketers who take the concept of competitive tension to the extreme having their agencies pitch for every project, either within an expanded roster or the open market. While it seems sound in theory, in practice it will last a short period of time until the better agencies withdraw from the process. It is draining on the agencies and also the marketing team if managed properly.

There are easier ways to address issues and drive performance than running a pitch. But if you do decide to run a pitch make sure you do it properly.

At best, the management of this range of providers is time and resource consuming and at worst leads to a fragmentation in the brand communications with each provider doing their “own thing”.

Identifying your key communications providers

The very first step is to identify the various providers currently on your roster. Often, over time, advertisers will accrue a growing number of providers. In one case an advertiser had more than twenty graphic design providers through leakage outside the original panel of three.

Often, in identifying the various providers, many advertisers will then go through a process of rationalisation to deliver economies of scale in their expenditure.

Defining your requirements and the role each will play

The next step is to then define your total requirements to fulfill your marketing plan. This includes budget, outcomes, planned campaigns and known activities.

Traditionally the activities would then be placed against the particular providers based on their core competency or the core service they were engaged to provide.

This is becoming increasingly difficult with most suppliers expanding and blurring their range of services to capture more revenue opportunities with technology assisting this in the digital domain.

Developing the appropriate structure to deliver outcomes

There are a number of different structural options for managing the relationships, from the traditional client agency relationship where the marketing team is responsible for the individual management and co-ordination of the various and usually small number of service providers to a collaborative adviser model where the service providers work collaboratively as advisers to the marketing team.

Many of these options are presented in the TrinityP3 discussion paper available on Slideshare.

The right structural / organisational model depends on the culture, needs and requirements of the marketing team.

Implementing remuneration strategy to encourage collaboration

Many marketers attempt to create a collaborative working environment between their various specialist service providers. While this can be successful in the short term, invariably power struggles and demarcation disputes develop as the various providers compete for incremental revenue.

The most successful approach is to take a whole of relationship approach to the task including review of remuneration, service level agreements, reporting and deliverables.

In our experience, many of the attempts to create a more collaborative approach to service delivery is undermined by contracts and remuneration that rewards individual providers higher than collective outcomes.

Managing the process to deliver the desired outcome

Without a comprehensive approach to the way in which the service providers are engaged in the relationship, efforts to develop more collaborative working relationships are almost always doomed to fail through struggles over roles, responsibilities and remuneration.

Once you have these aligned across your roster you then need to ensure regular measurement and management of the roster to improve collaboration using a system such as Evalu8ing.

The ideas that the agencies were putting forward appeared to be quite reasonable and would address the issue of collaboration. There would be more:

1. sharing of information on a daily and weekly basis,
2. discussion about strategy and idea development
3. interaction and co-ordination during the development and implementation stage

The problem was not the intention, but the execution, because every single one of these was followed by a discussion, and a meeting and more discussion about who would need to be involved.

Meetings can be incredibly effective if held and managed properly including:

• make sure you have prepared for the meeting
• choose the right venue
• have competent executive support
• ensure the meeting runs to time
• keep accurate records of the meeting
• report the outcomes to the appropriate people
• ensure participants stick to the subjects
• follow-up to ensure that all the tasks generated by the meeting are completed.

But how often do you participate in meetings where information is shared with little output or outcome except agreement for more meetings?

The problem is that often the meetings are pointless. Collaboration without objective is futile. But most of the time we believe we are collaborating to achieve an objective, only to discover that everyone has a different view of that objective.

To collaborate effectively is not about meetings. It is about alignment to a common and agreed objective.

In his book, “Silos, politics, and turf wars”, Patrick Lencioni identifies the requirements for achieving alignment and collaboration within organisations and overcoming the silo, politics and turf wars that get in the way.

1. A thematic goal
2. A set of defining objectives
3. A set of on-going, operating standard objectives
4. Metrics

The purpose of the objectives is to create alignment of the various stakeholders to objectives that are singular in focus, qualitative in nature, time-bound and shared by all. The purpose of the metric is to measure and monitor progress toward achieving the goal set by the group.

Without these objectives people find themselves holding multitudes of meetings trying to maintain alignment and focus. By holding the meetings with the purpose of achieving alignment up front, fewer meetings are required as the project progresses as people spend more time focusing on the area they are responsible for and less time determining what everyone else is doing.

This is basic project and meetings management. But often the basics are overlooked in the rush to get the project done.

How many meetings each day do you have trying to create collaboration?

That initial conversation went for about half an hour and I finally got to the bottom of what really was the issue. The marketing team and structure had to be changed about six times in the past 4 years (not uncommon in financial services) and marketing were trying to identify what was their role and opportunity in the new structure?

On the day I talked to this presentation, which I have shared on Slideshare previously.

One of the issues that arises when we have undertaken a Strategic Supplier Alignment (where we align suppliers to the strategic needs of the marketing function) is that the marketing leadership often rightly question if they have the best structure in place.

On the basis that structure follows strategy it is possible to see how the organisation strategically positions marketing by the structure applied.

It is interesting that often this conversation is not overtly explored when organisations are restructuring marketing. Instead the new marketing structure is deployed, resources are rearranged and changed and business as usual resumes, albeit with usually less resources and new reporting lines.

But beyond the usual vacillation between centralised and decentralised models, there are a number of structural features that can quickly identify if marketing is seen as:

1. A supplier
2. An advisor
3. A partner
4. A leader

Some of the most obvious signs are:

1. Does the Marketing leadership report to the CEO or someone else such as Sales or a Business Unit?
2. Does Marketing hold P&L responsibilities or just a budget?
3. Is Marketing responsible for NPD? Pricing? Distribution? Or simply Promotion?

Check out the presentation for yourself.

Let me know in comments which marketing structures you have seen and how well (or not) they work.

Research studies conducted in the late 1990′s in the US by AT&T’s Public Relations research department measured the interaction between news coverage and advertising. It was concluded that news coverage can have a substantial impact on consumers, on a par with advertising. They suggest that news coverage can substantially impact the investment a company makes in various forms of paid marketing communications and that expert management of media relations is critical to protect and leverage this investment.

Yet very few organisations really know how each influences consumers, what interaction there is between the two and what the consequences are if advertising is presenting one perspective, while the editorial media is presenting another.

Once upon a time advertising was king

There was a time most consumers were conditioned to receive messages through advertising. Editorial never stooped to cover commercial matters, which was regarded as giving advertisers a ‘free plug’.

Today editorial is much more an equal partner. Media see it as their responsibility to inform and educate – giving huge amounts of space to everything from reviews of products to coverage of the evolution of industries such as consumer electronics.

As well, a large number of Australians are now shareholders, so finance and company news has spilled over into general news.

The result is that consumers are now confronted with a smorgasbord of news, information and content. Some is advertising, others are editorial – but distinguishing between the two is increasingly becoming a challenge. Perceptions are created and opinions are formed from all of this – but never has it been so unclear as to what has the most potency.

What impact is this having on consumers?

Take telecommunications in Australia today. The participants are spending millions on paid advertising. But the sector, and the companies within it, are subject to constant editorial coverage. Advertising traditionalists will argue that to counter heavy media editorial coverage, marketers need to spend heavily on ‘controlled messages’ through advertising.

PR people will argue that research clearly shows that consumers are heavily influenced by what they read as editorial (and perceive as independent opinions), and that they are distrustful of companies simply telling their own story through advertising.

The bottom-line is that news/editorial coverage is, for many companies, assuming an increasing proportion of what the consumers see, hear or read about them. Yet many organisations are still running their PR and advertising agencies as separate silos based on the traditional model.

What is the opportunity for alignment?

Questions major consumer marketers, who find themselves in sectors widely covered by the news media, should be asking are:

1. Should we be finding out what in today’s total environment is influencing our consumers (ie not just researching the impact of our advertising)?
2. Are we coordinating well enough the messaging between advertising and PR?
3. Are there ways we can make our PR more effective in delivering product messages (and measuring the degree of success)?
4. Are our existing advertising and PR agencies working toward the one common goal with complementary messaging?

Often the problem is that public relations, increasingly like social media, is the domain of corporate affairs and reputation management. Therefore marketing is not aligned with corporate affairs. And corporate affairs is not aligned with marketing. Yet both have an important role in managing the reputation of the brand and the organisation.

We have found that the first step is to recognise the interaction between the two and then to align structure and strategy across marketing and corporate affairs.

Where have you seen these two closely and successfully aligned?

Interestingly few people have heard of the Scientific Method, even though it is at the basis of all science breakthroughs and is the best way yet discovered for sorting the truth from lies and delusion. The simple version looks something like this:

1. Observe some aspect of the universe.
2. Invent a tentative description, called a hypothesis, that is consistent with what you have observed.
3. Use the hypothesis to make predictions.
4. Test those predictions with experiments or further observations and modify the hypothesis in the light of your results.
5. Repeat steps 3 and 4 until there are no discrepancies between theory and experiment and/or observation.

At a time where there is so much change and many hypotheses on what will work and what will not, it seems to me that proven methodology like this could be easily adapted for marketing.

In the case of marketing ‘test & learn’ the steps could be:

1. Observe some aspect of the market place or use market research to define an insight.
2. Invent a tentative strategy, that is consistent with what you have observed.
3. Use the strategy to make predictions of the effect the strategy will have on the market.
4. Test those predictions by experiments and observations and modify the strategy in case where it under-performs the predicted results.
5. Repeat steps 3 and 4 until there is consistent over performance against the prediction when you would integrate the strategy into the core ‘go-to-market’ strategy.

I have heard from a number of advertisers, who have used this approach, that they start by separating their budget into a 10 / 20 / 70 split.

70% is for business as usual (BAU) – that is, they budget to undertake their usual marketing plan with a 30% reduction. This reduction is achieved not by paying the agencies 30% less for the same work, but by eliminating waste and investing less in non-essential or non-performing activities.

Of this 30% reduction, 10% is for observing, strategy hypothesising and testing and the remaining 20% for proving those test strategies that deliver worthwhile results.

It provides a disciplined approach to embracing those opportunities that seem to continually present themselves and testing and learning what is working and what is not before you jump in with a significant investment or worse, underprepared and under-resourced.

But it is not just new opportunities, the process can be used to test and learn how effective many of your existing strategies actually are delivering against your objectives and predictions.

We have been very effective in finding where you can fund this from within your existing marketing plan and budget.

Are you testing and learning? And if so, what is working for you?

I suddenly realised that this happens often in meetings between marketers and their agencies. The cause is often the two parties are often working at cross purposes: the marketer is trying to provide feedback, direction or criticism without causing offence to the agency and the agency is trying to achieve agreement to their recommendation or point of view coming from an often unrealistic but optimistic perspective.

In the process, two groups of communication professionals completely miscommunicate their intentions and fail to align to the business strategy. So here it is, “what marketers say, what they mean and what the agency hears”.

I was reading through these in a meeting and discovered three more happening before my very eyes:

There must be many more where these come from, so please feel free to provide any suggestions below.

Now it is a year or so later and you are finding that more and more of your budget is being spent online. You have social media and microsites and  Facebook pages and the relationship works well, after all it is easy and convenient to manage and that is one less agency to manage.

Meanwhile your corporate affairs people have engaged a public relations firm that specialises in reputation management and is managing the social networking with a Twitter account, a blogger influencing strategy and a Facebook page.

Meanwhile the sales promotion agency has been building microsites for competition redemptions for your various brands and has been collecting customer data in the various databases behind each microsite.

When you look across the various activities and add up the cost it is now in the millions of dollars when it started out at less than the cost of a television commercial. So the question is “Are you getting good value for money?” It is certainly a question I get asked by many marketers and more often by their procurement people.

The answer depends.

While it is true that great ideas can come from anywhere, there are fundamental differences between traditional advertising production approaches and digital:

1. Digital and especially interactive is better suited to an on-going engagement implementation rather than the traditional campaign approach.
2. Whereas traditional media production is usually consumable (create, use and discard) online production should be building assets for on-going use.
3. Even the content that is created for online use such as text, images, video, animation, music and audio can be managed and repurposed.
4. Applications such as e-commerce and database creation and management require a whole of business approach including finance, operations etc, beyond the scope of advertising.
5. The digital category is becoming more and more diversified with increasing numbers of suppliers working with increasing numbers of stakeholders – social, search, content management, analytics and reporting, customer data etc.

The fact is that an agency simply recruiting IT project management skills and programming skills is not enough. The digital marketing strategy needs to be aligned to the organisational IT strategy. Fragmenting this across multiple suppliers makes that alignment even more difficult to achieve.

Accenture found in their research paper “CMO – CIO Alignment Imperative” that companies who created an impenetrable alliance between marketing and IT are able to achieve unparalleled customer loyalty and advocacy.

So who is best to manage your online and digital strategy and production?

What are your thoughts?

The annual contractual negotiations form the basis of any advertiser’s leverage in the media buying market by ensuring that the full weight of anticipated media billings are used to negotiate advantaged rate positions with each media proprietor.

Whether as a two-stage or three-stage process as described below, the most important incremental values in terms of rate discount and added value aspects will be garnered during this annual negotiation that allows recognition of advertiser commitment.

In the media buying market, as in most markets, volume speaks terms.

Television Rates

In the case of television, there is a clear three-stage negotiating process that the media agency makes on behalf of each of their clients.

1. The media agency (or buying group) size sets the initial discount off base rate (usually known as the ‘ceiling’ for agency-based advertisers). In the current market, this discount is typically between 15-20% off the market ‘casual’ rate (variable on a network-by-network basis) and becomes the media agency’s ‘base rate’ for their client advertisers.

The negotiating ‘clout’ that is used to leverage this negotiation is made up of the combined volume represented by ALL the media agency’s (or buying group members’) advertiser clients.

2. Each advertiser’s individual spending volume then comes into play, as the client- specific discount structures are set based on individual volume or share. At this stage, a number of ‘added value’ aspects will also be built into the client-specific benefits including such things as bonus spots, sponsorship opportunities, position- in-break levels, etc.

This second level of negotiation sets the individual client’s rate structure for the buyers to use and is therefore the most definitive measure in terms of the relative benefit that accrues to each advertiser compared to other competitive advertisers.

3. The actual rate paid on a campaign by campaign basis is the result of the leverage the advertiser’s buying team can bring to bear on top of these first two discount levels in the context of then current market conditions, lead times, placement strategies and a range of other variables that can affect the way they buy the advertiser’s media. Naturally, this process means that the ‘final’ rate position can be variable depending on a range of seasonal, process and market factors.

In all cases, the rates that apply to the advertiser’s business are ‘net’ rates (that may include a rebateable media ‘commission’) and reflect the ‘deal’ negotiated on the advertiser’s behalf with each television network during the second stage as described above.

Importantly, in this country, the practice of ‘space farming’ is illegal and with certain historical exceptions where the miscreants have been caught and charged, is virtually unheard of in today’s market.

[‘Space farming’ means a situation where the media agency negotiates a rate ‘floor’ for themselves with the media that they then ‘mark up’ for each client depending on their volume and the remuneration deal they have struck. This is a practice that exists in some overseas markets but does not apply in Australia.]

Other Media

The complexity and competitiveness of the television market and the generally high volume of spend in this medium sees the above trading philosophy work well for media buyers and advertisers. The inherent volumes of the media agencies or buying groups bring strong negotiating leverage to the initial deals and this flows on to the individual advertiser client negotiations.

Other media generally lack the volume and complexity to drive the agency or group deal level so in most cases, the process becomes a two-stage procedure that basically reflects the second two stages of the television negotiating process described above.

However, it clearly becomes even more important that the initial contract negotiation is handled effectively to ensure that each advertiser derives maximum benefit from their individual buying volumes and the agency’s expertise in negotiation to ensure the best possible rate and added value deals.

Here again, these contractually based rate structures become the ‘apples with apples’ comparative measure between advertisers as they provide the basis on which each market buy will be predicated. As with television, seasonal and market conditions may vary the final ‘rate paid’ but it will be in relation to the contracted rate set.

There are several different ways to benchmark media buying efficacy. But we have found that this approach allows us to not only provide advertisers with a metric on the current media negotiating and buying performance in the context of their current media strategy, but takes this beyond the relatively one dimensional approach of cost alone, eg. CPM. to provide a diagnosis of where there are opportunities for greater value.

But the point is that chemistry meetings are so much more than simply the business equivalent of a date.

Of course there are procurement professionals who when running an RFP or RFT to select an advertising agency do not bother with any meetings, preferring to choose an agency based on the tender response. But this fundamentally ignores the fact that in most cases you are buying a professional relationship. Therefore it is important to test the relationship and the chemistry of the teams.

Therefore the chemistry meeting is an opportunity for the agency and the marketing team to meet and assess the alignment of values, culture and personality. Interestingly, in these situations you find that most people have made judgements on the chemistry fit within a blink and then spend the rest of the meeting looking for evidence to justify or challenge that instinct.

But these meetings are more than just bringing the two parties together. When we run a chemistry meeting we see this as an opportunity for the marketing team to get insights into what it would be really like working with the agency.

The chemistry meeting takes place following the submission of the credentials documents or the RFI. It is usually 45 – 60 minutes in duration for each agency. Although we had a client who wanted to speed date the agencies with 15 minute meetings. And it is usually held at the clients’ offices.

The problem is that obviously the agency will want to give the best presentation of their team and will be putting on their best performance. Therefore we do a number of things to challenge that performance and potentially let the marketing team see the real agency.

This includes:

1. We are not prescriptive on the agenda or the composition of the agency attendees other than to ask to meet the team they propose for the business.
2. We challenge the agencies, to see how they respond to the challenge, but also to test their thinking, strategy and team dynamics.
3. We look at how they have planned the use of the time in regards to the content, their use of time, the level of engagement and the team and their participation.

This means that within 45 mins to an hour you have gone beyond simply a meet and greet, which I agree is a waste of time. Instead we have tested:

• How well they have considered and planned for the meeting – it is interesting how many agencies will come to the meeting with no formalised agenda
• How they use time to best effect – so many agencies spend all of the time presenting to the marketing team and no time engaging them
• How well the team perform – agencies will often bring a number of members and then only the CEO talks while the rest stand around like props.
• How they react under pressure – like the time the CMO challenged the premise of a strategy case study that was being presented and the agency CEO turned on them angrily saying “What would  you know!”
• How well they know their materials – by asking questions straight from the credentials case studies and no one knows the answer, or even worse do not know the case study.
• How well the agency is prepared – like the agency whose main reason for wanting to work together was the lack of a client from that category on the agency roster.

I have heard about consultants and procurement professionals who place strict formats and guidelines around these meetings. But we have found when asked to do this it becomes a barrier to developing any really understanding of each party. While the whole process is contrived, it is imperative to make the process achieve the most effective outcome possible and the chemistry meeting is an important part of that process.

Do you hold chemistry meetings? And what formats have worked best for you? And what has not?

1. Incomplete or poor quality briefing – if you don’t know what you want or need how is the agency going to know?

2. Being too prescriptive in your requests – you are paying professional rates, treat the agency like professionals and get their recommendations before dictating your own.

3. Lack of time and project management discipline – if you don’t allow enough time to get the job done right, be prepared to pay for it later.

4. Lack of confidence in providing feedback – garbage in leads to garbage out in IT and advertising so be careful and concise in providing feedback to the agency.

5. Convoluted approval processes within the organization – every person in the approval process can have an opinion, but in the end the only one that counts is the ultimate decision maker.

6. Poor understanding of the advertising process – can lead to making decisions at the worst possible time in the process. Know the process and you’ll get better results.

7. Having the agency do tasks you should do yourself – as the agency is one of the more expensive outsourcing options and in the end they end up owning that knowledge.

8. Excessive last minute changes – never enough time to get it right up front, but always time to fix it in the end means you end up paying way too much.

9. Changing agencies when you change marketing directors – because the loss of brand and market knowledge within the incumbent agency is one of the great unaccounted assets.

10. Contact TrinityP3 to have your advertising processes benchmarked against the best practices in Australia and find out how you can reduce waste and increase value in you advertising.

Imagine if you could save 10% – 20% of your current advertising spend. What would you do with the savings? Why not comment here and let me know.

Unlike the traditional creative pitch approach or as some call it the “creative beauty parade” where you only get to see the outcome to the brief you provided, our strategic workshop approach really lets you test drive the agency before you make a choice.

The strategic workshop approach differs from the typical creative brief in that when a shortlist of agencies is decided, instead of providing a creative brief for the agency to develop recommendations, we provide the agencies with a strategic problem / opportunity and then undertake a full strategy planning day with each agency. During the strategy workshop the marketing team work with the agency using the agencies own strategic planning process to develop a solution.

The benefits of the Strategy Workshops are:

1. It allows the marketing team to work with the agency to discover how well they work together and see the process unfold before them.
2. It allows the marketing team to see how and who in the agency drive the process and insights (often marketers can be left wondering who worked on the idea as in the traditional process this is hidden).
3. The marketers get to work with three agencies on a problem or project that is important to them.
4. It takes no more time than the traditional process once you account for briefings, question and answer sessions and the final presentations.
5. Often the strategy and the concepts are more suitable due to the fact they are effectively co-created as will be the case when appointed.
6. Marketers report being able to make more informed decisions on agency best fit.

Both marketers and the agencies that have used the Strategy Workshop process report better and more sustainable outcomes. Even the agencies that are unsuccessful find the process more open and transparent.

How does this compare with the agency search and selection processes you have used? Let me know with your comment here.

Yet many marketers can be so obsessed with how much they are paying for media they forget to consider if what they are buying is right.

Almost anyone can buy for a good price these days

With a collection of major buying groups, client specific media agreements and buying strategies depending on the state of the media market, most advertisers are in a position to buy cost effectively.

In fact, in seven years of media buying benchmarking, the only time we had an advertiser who was buying above the market rate was because they had poor buying processes in place, consistently allowing too little time to effectively negotiate the campaign-by-campaign deals.

Based on this experience, at best, marketers need to ensure they have the appropriate processes in place to ensure they are buying media effectively.

Media options are expanding and changing rapidly

The issue of media strategy has become critical in the face of unprecedented audience fragmentation and the ever-increasing number of media options available to advertisers.

While much of the discussion is about the emergence of the digital platform and the many channel options this has provided, traditional media channels are embracing technology to expand the options they offer. Interactive and digital OOH, print publishers carrying video and television facilitating social media.

The increasing number of new channels and the corresponding decrease in the effectiveness of traditional media means that developing effective media strategies is becoming more complex.

Many advertisers are being left behind in the rapid change

The problem is that many advertisers and their media planning and buying providers are still working within a traditional paradigm. Focusing primarily on media cost overlooks the increasing importance of strategy in ensuring the right media is being selected.

Even at the lowest possible price, the wrong media selection is no bargain.

Therefore it is important to focus on ensuring the right strategy process and resources are in place. The right strategy process delivers maximum value.

About four years ago we developed a benchmarking process to ensure advertisers and their agencies have the most robust and effective media planning and strategy process.

The TrinityP3 Media Strategy Benchmarking evaluates both the advertiser’s process in creating a platform from which the media strategy can be developed and then evaluates the media strategy process to ensure the agency is delivering the full potential of that platform.

Scores are provided for all elements of the strategic process providing absolute clarity on the quality of the media planning process undertaken.

What do you do to improve your media strategy?

1. When briefing print advertising, specify not only the media type, but also extra usage requirements (ie. posters, outdoor, etc) the campaign duration, appearance frequency and variations required as these impact on the concept and budget.

2. Specify as many aspects of the production as possible; budget, quantity required, all usage and format requirements and distribution to ensure the agency can make the best recommendation.

3. Define all mandatories in the briefing, including logos, corporate colours and style guidelines to reduce any time required to incorporate these later.

4. Ask the agency to prepare a production schedule following the briefing to ensure any cost penalties are minimised due to time constraints.

5. Ask the agency to prepare a production estimate before approving a concept, to ensure the idea can be achieved within the allocated budget.

6. If photography is required, have the agency check your existing digital image assets for appropriate material before committing to the cost of new photography.

7. Hold a pre-production meeting for all photographic shoots, large or small, to ensure all aspects are approved before the first shot is taken.

8. Proof read and check all facts at every step of the finished art process as once you give approval the responsibility lies with you.

9. Ensure you review a colour accurate proof (either digital or chemical) before approving the project to go to print.

10. Contact TrinityP3 as we provide assessment, auditing, implementation and training services to ensure ultimate transparency and accountability.

Most of the stories you hear about printing disasters relate to the actual printing process – wrong colours, bound the wrong way etc and everything has to be thrown away and started again. Almost all of these are caused in the pre-production process. What disasters have you experienced or heard about? Let me know here with a comment.

1. Implement a documented protocol for approval of each advertisement, requiring sign-off from people with relevant knowledge and expertise in the product or service, industry matters and the law.

2. Choose a medium that is appropriate for conveying the promotional message, taking into account the potential audience, and nature and complexity of the offer, product or service.

3. Consider how people receiving your message (both inside and outside your audience) will interpret it, taking into account special characteristics or vulnerabilities. Consider all potential messages – not just those you wish to convey. Ensure the overall impression is complete and accurate including any illustrations (eg accessories, models shown). Do not use corporate or celebrity images or slogans without authorisation.

4. The nature of all material terms and conditions should be referred to up front, in the same medium as the main promotional message (eg. tv voiceovers).

5. Any disclaimers and qualifications should not contradict but explain the main promotional message. Fine print must be prominent enough to be brought to the consumer’s attention – consider size, location and duration.

6. Disclose the full cash price of the product or service and any obligatory charges that go with it (eg. delivery fees), including GST. Promoted discounts must be taken from the ‘normal’ price available for a reasonable period immediately prior to the ‘sale’.

7. Ensure all claims are not only literally true, but relevant and appropriate in the context of the product and offer. Ensure claims can be substantiated on an objective basis, and there are reasonable grounds to verify any statements regarding future matters.

8. If making comparisons with other products, ensure they are fair, accurate and current.

9. Ensure you are ready, willing and able to honour all express or implied promises made. If there is limited stock available, this should be clearly disclosed.

10. Contact TrinityP3 if you are unsure whether all participants involved in the creation and production of your advertisements understand these issues. Together with your legal advisors, we can ensure you have a practical, Trade Practice Act compliance process tailored to your specific needs.

Under court order, Target Australia was ordered to produce and air an apology commercial for being misleading and deceptive under the Trade Practices Act

Do you have a rigorous process to ensure your advertising is not misleading and deceptive? What examples have you seen of misleading and deceptive advertising practices? Leave a comment and let me know.

1. What media services do you require? Do you want a strategy / planning specialist? A search specialist? Or a big buying house? Or is it a general one-stop-shop? Each option comes with strengths and weaknesses depending on your needs and circumstances, but the first step is to identify these.

2. What is the buying power of the agency? The majority of national advertisers buy through media agency buying groups, and the size of their billings and your budget can significantly influence the level of discount an advertiser will enjoy.

3. What media specialities do we need? A number of ‘specialities’ have emerged within the media function including Channel Planner, Digital Strategist, Search Strategist, Social Strategist, Consumer Insights Specialist, Sponsorship Specialist, Econometric Modelling Specialist, Research and Technology Specialist, etc. Make sure the agency has these skills, but likewise don’t pay for what you don’t really need.

4. What media tools and software do they provide? Optimising software was the first, rapidly followed by Modelling software (awareness, sales, response), true Econometric Modelling software, Portfolio Management software, etc. But ‘Smart’ software is only smart if they can demonstrate the benefit to your business.

5. What additional skills do they provide? Specialist resources require specialist personnel and some of the new areas need people with skill sets from outside the industry. It is not unusual to see a dedicated Market Researcher in the Consumer Insights role, or an Economic Statistician in the Econometric Modelling area.

6. What are the skills of the people who will be working on your business? Some media agencies have developed internal ‘cells’ that specialise in a particular category or industry, across a range of individuals. Ideally you should look for experience in the basics as well as the technology and digital  specialists from a cohesive team that provides both youthful creativity and mature experience.

7. How engaged will the senior management be in your business? Media agencies are successful business units with skilled and seasoned management. Most are run by experienced media specialists/generalists and the skills these people bring to the table are critical to their success.

8. What form of remuneration do they prefer? Cost plus retainer? Project fees? Media commission? Performance Based Remuneration (PBR) aspect that rewards or penalises the agency on performance? The type of remuneration should work for both you and the agency in regards to value, changes in budgets, workloads and cash flow.

9. How effective is the ‘chemistry’ or ‘fit’? Most relationships that last long-term are based on mutual respect, understanding and consideration; more than the camaraderie of the new business pitch; its a genuine interest in or passion for your business; an open and honest approach that will engender trust and respect.

10. Do you have the time and expertise to consider all the options? If not, contact TrtinityP3 as we have extensive and detailed database of media planning and buying agencies and experience in helping advertisers make the right choice.

What are the main considerations you use in selecting a media agency or specialist service provider? It would be good to hear that it is not just price. Let me know here with your comments.

1. What is your company’s experience and expertise? Some consultants have experience in one area, but try to pass themselves off as experts in all areas.

2. What is your consultant’s background and qualifications? You could get an accountant telling you how much you should pay for a TV commercial.

3. How recent and practical is that experience? Those that can do, those that can’t teach. And some even become consultants. The best theoretical advice is not a replacement for the practical.

4. How are you remunerated and why? If you just want savings go for the consultant that charges a percentage of savings as their incentive. If you want value look for a fixed fee. If you want to pay a fortune, go for head hours.

5. How much do your services cost? How can you judge value for money if the consultant is not willing to provide you with an upfront cost? Request a detailed proposal including timelines and specific outcomes. Too often consultants have low-balled to get the gig and then charged a fortune to deliver it.

6. Do you receive any commissions, fees or kickbacks from any other party? Some consultants get paid by both clients and agencies, yet don’t declare this conflict of interest.

7. On what principles does your business operate? The right advice starts with the shared values and principles so ask to see the consultant’s principles and values, or even better, testimonials from their clients and agencies.

8. Do you have professional indemnity insurance? It is a great way to sort the pretenders from the professionals, as there are many fly-by-night operators out there. The guy running his consultancy from his kitchen table will not bother with these basics.

9. What clients have they worked for? While perfectly reasonable, the amount of information they offer is a good indication of how much they will be telling others about your business.

10. Contact us at TrinityP3 and ask us the same questions. You’ll find we are one of the few truly independent industry consultants to help advertisers achieve maximum value in media, digital, creative, direct marketing, print and television production, public relations and across all marketing services.

You can even check out our client and agency testimonials here.

1. How big or important do you want your account to be? Dominating the agency could mean you fund the infrastructure that others benefit from, while being a smaller client may mean you are overlooked at times.

2. Where is the agency located and how will they service your business? Are you happy to source the best provider in the market, no matter where they are located, or do you want the best local supplier.

3. What strategic sources do you need and want? If you need a business or marketing strategist better to select a specialist than to expect to find this in the communications provider.

4. Who will be working on your business and how committed are they? Avoid the New Business ‘Pitch’ Team who you will never see again. Identify the resources that will be working on your business short and longer term.

5. How important is experience in your category? The conundrum is wanting an agency with recent experience in your category without account conflicts with competitors. While ideal to have experience in your category, it could come with set thinking.

6. Does the agency MD or CEO align with your business? The senior management team are usually the most experienced practitioners in the agency and therefore critical to your success.

7. What type of remuneration do they prefer? Cost plus retainer? Project fees? Media commission? The type of remuneration should work for both you and the agency in regards to value, changes in budgets, workloads and cash flow.

8. How much of a partnership do you want from your agency? A partnership is about risk and reward. The most effective way to build a partnership is Performance Based Remuneration (PBR) where the agency risks profit and even overhead for the opportunity to share in the profits.

9. How effective is the ‘chemistry’ or ‘fit’? Most relationships that last long-term are based on mutual respect, understanding and consideration; more than the camaraderie of the new business pitch; its a genuine interest in or passion for your business; an open and honest approach that will engender trust and respect.

10. Do you have the time and expertise to consider all the options? If not, contact TrinityP3 as we have extensive and detailed database of agencies and experience in helping advertisers make the right choice.

When selecting a creative agency what are the criteria you use? What services are important to you? And what attributes? And how easy is it to distinguish one agency from another? Let me know with your comments here.