Building from last week’s “Cliffs Notes” on production transparency, this week we take a look at case studies and examples of how this very topic can directly impact your budget.
Whether it’s internal or external, having a resource for production expertise can lead to real savings for advertisers.
Below are a few real-world examples of how a lack of transparency can lead to increased costs:
Here in the United States, bids for TVC/video production shooting and post production are often on the Association of Independent Commercial Producers (AICP) and Association of Independent Creative Editors (AICE) forms. However, the scope of work for digital, photography and experiential projects are often in different formats with varying levels of detail and specifications. This makes it extremely difficult to compare across bids submitted. A best practice is for the advertiser to utilize a standardized template with all the required specs and appropriate level of detail (similar to what is in practice for TV and video). This allows for a smooth pre-bid meeting and the ability to make smart business decisions regarding costs.
Related Party Transactions with Bidding:
The ANA Production Transparency Study noted cases where related party transactions were not disclosed leading to various competitive bidding issues. In a recent project, a freelance producer who also owned a production company wanted that company to submit a bid for the project. In this instance, since an external production consultant was involved, the relationship was disclosed and bids from all production companies were received and evaluated by a 3rd party resource. Can you imagine what would’ve happened if the production consultant hadn’t required proper disclosures before bidding began?
During a recent bid review, a line listed “equipment” with an associated dollar figure. When asked for clarification, the specific items (grip, lighting, back drop, gels, etc.) with prices were provided and the total “equipment” amount came down several thousand dollars.
A brand director on a commercial shoot was asked by the agency to approve an overage on set due to some overtime requirements. The brand director “signed off” not really paying attention to the amount, authorizing the over time required in the amount of $60,000. When the production consultant analyzed the charges the next day and looked at the detail requirements for the two hours, the overage amount should have been $16,000. Having someone with production knowledge understanding the details and digging in really paid off in this situation!
Why use your precious budget on things you shouldn’t be paying for? In today’s world of high turnover, short-staffed teams, and people who are stretched so thin, there’s a higher risk for error — which can impact your bottom line. Invoicing transparency issues aren’t necessarily intentional or malicious, but it’s critically important review all billing prior to payment to ensure you don’t fall victim to common issues, which include:
- Number of individuals above guideline limits traveling to the shoot
- Inappropriate class of airfare, upgrades, airline clubs, monthly fees, subscriptions, etc.
- Miscellaneous non-billable expenses (items you can’t imagine!)
- Non-transparent talent charges related to miscellaneous payments, member violations, fees, wardrobe, overtime, etc.
- Charges to incorrect brands or projects (and yes, even incorrect clients)
- Duplicate charges
- Past due balances on invoices
- Taxes charged on non-taxable items
NOTE: MRA has an entire team of people who review agency invoices and back-up documentation to ensure billing is 100% accurate. To learn more, click here to download an overview of our LineWatch® Invoice Monitoring process.
Purchase Order & Budget Management
When advertisers don’t have solid pre-bid and bid review processes in place, project estimates become inaccurate and one risk is having the purchase order open for a larger amount than needed. If the advertiser doesn’t have an individual or team closely managing open purchase orders and budgets (vs. actual expenses), significant amounts may be left on open purchase orders and when final billing is settled, there isn’t always enough time to utilize the available funds. Imagine if YOU were the client that found out too late an entire additional spot could have been produced for your campaign!
Join us next week as we provide steps for how to get started and make improvements to your production management practices.
Written in collaboration with Angela Saferite.
Board members, CMOs and CFOs are starting to ask what their companies are doing. Are you prepared to answer these questions?
We’ve pulled together the “Cliffs Notes” version of what has been happening in the industry and the ANA’s recently released study: “Production Transparency in the US Advertising Industry.”
Advertising production and media, two of the biggest marketing spend areas continue to be at the forefront with issues and investigations. This presents an opportunity for advertisers to make significant changes. It’s time to roll up your sleeves and get started!
What Is Transparency?
- Full disclosure of relevant info required for informed and intelligent decision-making
- Lack of hidden agendas and conditions
ANA Production Transparency Task Force: Two Part Mission
- To assess for lack of transparency in the US production industry
- To assess production management processes and develop recommendations for improvement
- The spend is huge – no single source estimates available, video commercial production alone is $6 billion (source: AICP June 2016 member survey), other areas include audio, digital, print, out of home and experiential/event marketing
- Digital has driven a fragmented ecosystem for content distribution
- Advertisers are working with an unprecedented number of agency, media and production partners
- Expanded client requirements for commercials and content
- Pressure from advertisers on fees and production budgets
- Agencies experiencing decreasing market share and revenue and adapting by increasing service offerings including in-house production, editorial, and music facilities
- Need for more content with less money and fast turnaround driving advertisers to seek greater flexibility and efficiency in production spending including decoupling, pre-qualifying suppliers, and direct sourcing
All of these factors created the “perfect storm” for issues to rise to the surface.
Findings of the ANA Study
- Creative agencies are increasingly directing post-production projects to affiliated companies within the same agency holding companies
- Producers at times ask for a “check bid” from independent post production companies with inflated prices to drive the work to the in-house option
- The producer did not work to negotiate pricing with the external bids but utilized the information to make sure the in-house estimate was lower
- Clients aren’t always informed of the ownership status of the agency unit submitting the bids
- Agencies markup vendor invoices a certain percentage which is not always disclosed to the advertiser
- Agencies are managing the bidding process while also participating in bidding for the project
- Agency management is incentivized to keep work in-house
- Cost savings are not always realized if the in-house bid was estimated low and has significant overages
- Agencies are at times acting as the principal with production suppliers entering contracts directly with the production supplier versus entering into the agreement as the agent of their client. Principal transactions can result in nondisclosure of the original purchase prices as well as an incentives/rebates paid by production suppliers and limit the advertiser’s right to audit.
- Experiential and Event Production areas have fewer bidding and reporting requirements, less operational oversight, fewer compliance audits, and more reporting lapses due to the just-in-time nature
- Production companies and agencies file for state commercial production incentives without the advertiser’s knowledge or approval; these savings can range from 15 – 30% of production spend
MRA has provided a summary categorizing the major issues and next steps, click here for a download of this chart.
ANA Member Survey Findings
- Only 43% of advertisers require agencies to disclose if bidding a production job to an in-house or affiliated production company
- Over 60% do not require or know if their agency contract requires production rebates and incentives be passed back to their company
- 33% confirm knowing their agency acted as principal with production suppliers, 38% said the agency did not and 29% don’t know
- Marketers lack familiarity with state commercial production incentives and don’t know if their company is benefiting
- The knowledge of advertiser personnel making buying decisions varies dramatically and in many cases, is very limited
Similar to what was discovered with media transparency, the blame is not all on the agency side, advertisers need to be much more actively managing and controlling production spending.
Join us next week as we explore the study’s recommendations for advertisers and case studies illustrating how to bring these recommendations to life.
Written in collaboration with Angela Saferite.
Join MRA Tuesday, August 23, 2016 at 2pm EST for a FREE webinar — Savvy Celebrity Negotiations: 7 Areas You Should Consider. This 45-minute session will be led by MRA’s own Jerry Rice, a veteran in the advertising industry who served on the Joint Policy Committee for 12 years.
This information-packed webinar will cover 7 key topics, including:
- What differing levels of celebrity could cost you
- The variances between “cost” and “price”
- Hot to capture better pricing while you negotiate
You won’t want to miss this free session — click here and register now!
You can with MRA.
Check out a few examples of how we’ve helped others spend their production budgets more efficiently:
Recently, a client was presented with new creative work. The agency recommended producing three :30 spots behind the new creative; total bid for the production amounted to $1,600,000 — somewhat steep, but within the limits of what gets spent for commercials in that category.
On analysis of the boards, MRA’s consultant broke down the costs by commercial. She suspected that a disproportionate share of the expenditure lay in an unassuming-looking set called for by only one of the spots — not immediately apparent from the board, except to a trained eye.
On digging further, it turned out that this set alone cost $540,000, or 34% of the total production cost for the entire pool!
When the Product Manager was apprised of the facts, she decided (smart Product Manager!) to produce the other two :30s. Total production outlay, just over $894,000, instead of the originally-recommended $1,600,000.
It’s not easy to see production pitfalls and extravagances in a storyboard. That takes years of practice, and the experience of working with thousands of commercials. The average Product Manager, who may produce as many as three commercials a year, can’t be expected to act as his own production expert. Moreover, negotiating costs is not the optimum use of a Product Manager’s time.
It is, however, the optimum use of MRA’s time. That’s why we work for over more than 30 clients on retainer, and why we’ve done project work for all but a handful of the top 200 advertisers over the 35+ years of our existence.
Here are a few more examples of the kinds of savings MRA experts make — large and small.
A major client was facing production of a large pool of commercials, featuring multiple non-speaking actors in each commercial. The agency bid the job in Los Angeles — and also in South Africa and South America. Since the talent was non-speaking, dialogue wasn’t important: looks, acting, and location were.
MRA has had considerable experience with overseas production and was able to provide valuable information about the necessity of extended lead-times in scheduling and the placement of heavy emphasis on preproduction in order to assure a smooth job.
The commercials turned out just fine (thank you!). The client ultimately saved $500,000 in production costs over the Los Angeles-based bidder and, coincidentally, $458,000 in reuse fees. The agency feels good about the results and, when last seen, was sporting the commercials on its sample reel.
Another client had two :30s (each with a :15 cut-down). The shooting schedule called for four consecutive days in outdoor locations in California. Given the potential for rain in February on the west coast, MRA strongly recommended that weather day insurance be investigated; our people were able to recommend an insurance company which had previously provided good coverage at a very favorable price for our clients.
Weather-day contingency costs on this project were estimated at $80,000 per day for a total rain-out. On the other hand, the weather-day insurance premium came in at $28,000 for all four days, guaranteeing that nine hours of each 12-hour shoot day would be rain-free.
As it turned out, one shooting day was drowned out and a total loss. With proper documentation, the insurance company came through with $80,000 in coverage, the pool of commercials was produced as planned, and client and agency were pleased with the results.
Do you always accept the low bidder on production? We don’t; instead, we look for the “best value” bidder.
We had a recent case where the agency recommended — and the client concurred — with the middle bidder: $25,000 higher than the low bidder. MRA agreed that the middle-bidding director would do a better job and then set to work, negotiating a savings of $11,693 in production, casting, and agency travel. What that meant was, the commercial got the best director; agency and client were happy, and nearly half the premium cost was saved by judiciously pruning the production estimate.
In addition, the agency planned to hire nine on-camera principals as actors — four more than the five agreed to in the pre-bid conference. Notified of the additional actors by MRA’s consultant, the client was able to persuade the agency that six on-camera principals would be plenty — with an ultimate savings of $45,000 in reuse payments.
Net result: the commercial seemed sufficiently “populated” with actors; agency and client were happy with the results, and the client had a little extra cash to put into media or other areas.
Excedrin® Migraine, Congrats on the Recent Wins!
It’s thrilling to see a Silver and two Bronze medals in honor of the creative associated with this campaign, and we’re honored to have played a part in making it come to life.
After more than a year of planning, the Excedrin® Migraine campaign went live in April 2016, and the entire campaign wrapped itself around various real stories of people who suffer from migraines. Four individuals who suffer from migraines tell their story in four different videos. These stories are told in a truly unique manner whereby their partner or family member wears an augmented reality migraine simulator.
The production of this campaign kicked off many months ahead of the launch, since there was so much to plan in advance of video shoot. MRA was involved from the very beginning when we helped capture the best people for this project — from casting to directors to editors, etc.
In addition to the four videos being shot, a long format video showing what a migraine feels like, science expert videos, preroll deliverables, and print stills were a part of this project. MRA recommended a genuine real people casting agent for the project and also recommended a production company, editorial company, and a talent payroll company to help with talent payments, which proved to be extremely successful.
Throughout the production process, which involved many layers of agency personnel (creative, digital, account, and even some freelance), MRA provided support well-beyond cost control. Many deliverables were produced for various regions around the world, and we were delighted to be part of the team, co-produce, and serve in an advisory role to ensure everyone could do their very best work — at the very best price.
MRA is so very proud to have the opportunity to serve more than 500 brands around the world, and we want to give special thanks to Excedrin® Migraine for allowing us to serve you on this amazing project!
Haven’t seen the campaign yet? Check out the videos here.
Keeping A Watchful Eye on the Advertising Agency Landscape
If you’re searching for an ad agency (or in a great relationship but want to keep a watchful eye), you’ve come to the right spot to stay up to date with today’s hottest ad agencies.
In today’s marketing world, many brands are on the lookout for a fresh approach and new ideas to give them a competitive edge. As marketers evolve to meet the rapidly changing needs and preferences of consumers, ad agencies are also evolving to keep up the pace and become better partners to their clients. With an eye on the landscape, you’ll be poised to see the leaders innovate and watch up close how agencies are structuring to do work that moves brands forward.
In this new fragmented and multi-channel world, many are ditching the outdated labels of “advertising agency” or “digital agency” and are taking the role of a trusted advisor that solves business problems by delivering innovative approaches. New models and disruptive forces are influencing ad agencies to forge new ground and blur the lines between strategy, creativity, marketing and technology.
If you want to stay up-to-date with the best industry practices and keep an eye on who’s out there leading the pack, then be sure to grab a copy by clicking the button below.
6 Types of Ad Agencies Featured
These are agencies that for one reason or another we keep our eye on, and would suggest that you do the same! Some of these agencies do great work for our clients that we see first-hand; others just do great work, and we would love to work for you as you work with them. When you download the pdf, you’ll find links to each agency’s website, notable clients, and recent kudos — and the ad agencies listed are sorted into 6 various categories:
- New Breed
- Independent, and proud of it
- Smaller(er) with a fresh approach
- Digital roots
“New Breed” Digital Agencies
The only thing these marketing agencies have in common is that they do things differently. It may be their approach, their world view, their way of doing business or just the combination of intangibles that makes them so uniquely who they are. They are not going to be right for everyone, and they are likely to put as much energy into determining whether you are the right fit for them as you would expect them to put into trying to prove that they are the right fit for you.
Independent, and proud of it
These agencies are staunchly independent and very proud not to be beholden to the oversight of large holding agency holding companies.
Small(er) with a fresh new approach
These ’boutique shops’ have specialized core competencies and more often they will tailor their offer to a particular industry or sector. Despite their small size, they can pack a strong punch. You’ll likely find that all of their talent is their top talent, so you’re working with key personnel every step along the way.
If you’re curious who these great agencies are…click the button below!
Rushed production is like a junk-food binge — everyone knows it’s wrong and bad for them, but they do it anyway. Many have said for years that the ad production process can be good….and/or fast…and/or cheap — you can pull it off with two, but it’s pretty darn rare to score all three.
Over the last 36 years, we’ve worked with 1000’s of national & global brands; we’ve seen marketers time and time again with the mentality, “Well, we don’t have time to do it right…right now. But we’ll have time later to do it over if we need to.” Hmmm…do you see anything wrong with that thought?
Advertising Production: The Wretched Waste of Rushed Timelines
The cost premium for rushed production is 15%-25% — or more. Most Product Managers would be in serious trouble for missing any of their other marketing numbers that badly.
But chances are…you, yourself, have authorized rush production at least once during the past year. There are times when rush production may be warranted — such as responding to a competitive pressure. However, 90% of rush production is totally avoidable. Ad production that is rushed is nearly always the result of inadequate planning or discipline.
Consider this…right this very moment, you likely know several dates in the coming year when new advertising is due. You know when new markets must be opened…when print media closing dates are scheduled…when your dealer or bottle meetings will be held…when research findings on new creative have to be in.
In your marketing timeline, you may have penciled in a period of 8 weeks for producing your TV commercials or print ads (and likely 12 weeks if your spots have special effects or animation — or for global production).
And while you don’t plan on compressing this timing…if you run behind on any of the other functions that lead to new copy, you end up squeezing the production schedule — because the air date or insertion date doesn’t move.
Yes, you can rush production. But you’ll also be taking a dreadful creative chance in the process. Here’s how:
In a rush situation, none of your three best directors (or any other vendor, for that matter) may be available. You’re stuck with “what’s out there” – be it fourth choice of talent, or sixth, or twelfth. Your agency may very well say, “Because we’re in a rush, we have to single-bid this job” — and you lose all the advantages of competitive bidding. And normal competitive bidding can save 10%-20% of your production company costs.
In any case…rush will insure that whatever production company is invited to bid, realizing this is a tricky and not completely defined, will load up the estimate with an additional 15%-25% worth of time and materials so they can be covered.
2. Preparation time
A client in dire straits decided to improve his chances of securing good talent on a rush schedule by simultaneously casting in New York, Los Angeles, & Chicago. Obviously, that builds in a waste factor of 66% for casting expenditures, since the client likely threw away two-thirds of the effort.
Additionally, on a rush schedule, preparation of color-corrected packages can carry a premium of 50%-100%. Extra locations are scouted. Extra props and wardrobe are bought. (“I don’t know which she’ll like better, the yellow or the blue. Get ’em both.”)
3. Actual production
Everything will be hopelessly padded and overproduced. Extra setups are shot (“Well, we may need to cover.”) And hasty decisions aren’t normally well thought-out…well, considered, “quality” decisions.
What really hurts you is the attitude that pervades every facet of a rush production. Everyone is so absorbed with “getting the job done” that no one is thinking, “How can we do this better?”
Try opening an editorial house on a weekend or on a national holiday. That has cost many a client a bundle. Rushing editorial or retouching can add 25%-50% (or what the traffic — that’s you — will bear). Hope you have deep pockets.
And how often have you heard this, “We’ll fix it in post!” Lack of proper preparation time can cause a false sense of security that all shortcuts can be fixed during post production. And in many cases, post production costs and retouching costs can escalate significantly due to the very fact that “fixes” need to be made.
What Can You Do About This Wretched Disease of Rushed Production?
Well, you can’t cure it — but you can certainly inoculate against it!
Right now, sit down and look at your advertising plans. Keep in the 8 weeks for TV & print production (12 weeks for global or spots with special effects and/or animation). Now, add in additional weeks for creative development, copy testing & research analysis, management approvals, and legal snarls — and every facet of marketing development which you know, through experience, you’re going to run into.
And then stick with your new resolves! Keep after your agency to make deadlines, not to slide by them. Keep the pressure on suppliers to outdo themselves — while they still have time left to come through with maximum performance.
Beat the rush production — before it beats you, financially. Or worse, before you miss an important date.
Want some help on the specifics of rush, and how you can preclude them from infecting your marketing operation? Contact us – we’d be happy to help.
Commercial Production Costs: It’s amazing how simple our business really is. Here are 3 unassailable principles:
- There is absolutely no relationship between a commercial’s cost and its “creativity.” Further, there is only a rudimentary relationship between a commercial’s cost and its production values.
- Commercial production cost-cutting is not the most appropriate goal for an advertiser. Instead, a better goals is the elimination of waste in the production process. Do this well and you’ll save 15%-25%.
- The most effective way to spend less on production is to buy less. The only way to purchase wisely is to know what things cost.
Now, a few variations on the above themes:
#1 – There is indeed no relationship between cost and creativity.
First, the most extravagant commercial — irrespective of cost — is the ineffective commercial. Whether it cost $100,000 or $1,000,000 doesn’t matter; a bum commercial is a total loss. Beyond that, some of the greatest television ideas are essentially simple ideas. Many products that use television extensively are basically simple products, consumed in a kitchen, used in a bathroom or drunk at a tavern. One of the most memorable tire campaigns on TV eschews running shots, road races, and expensive location shooting. Instead, it stars only the client’s tire…and a baby. Talk about visualizing the end result benefit! None too expensively, either.
For the most part, extravagant production costs are generated in the execution of commercials, not by the basic strategy or selling idea. Execution is what wins Cannes Gold Lions. Concept is what wins share of market numbers.
We are clearly not constructing a case for making “cheap” commercials; we are instead promulgating an argument for putting the heavy-duty creative work against the selling idea. There is absolutely no predictable or discernible relationship between the amount of money spent on a commercial and its “creativity.” And, beyond a well-spent budget, there’s virtually no client-perceptible or consumer-perceptible difference in production quality. If you can’t see it in the screening room or your customers can’t see it when viewing at home, why are you spending money on it?
#2 – You can realize a larger share of potential savings not by cutting costs but by eliminating waste
Define “waste” as “something you go to the trouble and expense of producing — but which the viewer never sees.”
Overbuilt sets are an example. Once, we had an agency argue endlessly and mindlessly for a 32-ft. wide set. The middle 12 feet of the set were all that ever appeared in the commercial. Two-thirds of the set — ten feet on both sides of the television frame — which was constructed, erected in the studio, painted, propped, and lit (the reverse process of striking and disposal costing an equivalent amount of money) was total waste.
We once saw an Art Director hold up a shoot for a half day, insisting that the table (concealed by a tablecloth) in a food shoot was the wrong period furniture. That was waste: under the tablecloth, the viewer couldn’t see whether it was a Louis XIV table — or a tray on top of a sawhorse.
Commercial production is an inescapably wasteful business. It is populated to a growing degree by inexperienced buyers, and all-too-experienced sellers of production. The selling posture of production houses is, “Whatever you want, you got it!” and that’s a heady experience for a young Art Director. But there’s a tremendous price connected with that sort of “cost-is-no-object” operating principle, and of course the client is the only one to pay.
It’s not surprising that responsible agencies today are calling for better planning, more thoughtful allocation of elements, and better estimating in both production specifications and sets, film, time, crew, props, and wardrobe.
#3 – If you know what your production elements cost, you may buy less — and therefore spend less
The important distinction lies between what things cost, and the prices agencies are asked to pay for them. This item needs more attention than it gets. For example, everyone knows what percentage is charged for Crew P&W: We’ve seen overrides from 7% to 35%! But what’s the true cost?
In addition, it’s a rare agency producer (and virtually no creative) who can tell you at any moment what an average sound day on a set will actually cost in Prague, Toronto, Mumbai, New York, or Sydney. The charges, however, run from $20,000 to $200,000.
I once sat in a pre-production meeting in London with a top agency and first-rate client, and absolutely no one in the room (except for the interloper American) knew the cost of any of the elements in a board which had been parsed within an inch of its life. Not to know these costs, at that late stage in the commercial’s life, was unprofessional and unforgivable.
There have been instances where U.S. agencies have installed mature and experienced former producers as heads of their Production Departments. This may be the best way to buy the knowledge so critically needed in the business.
One of the world’s largest TV advertisers once set up and ran a carefully-controlled mirror-image production test; and, as a result, discovered the true cost (not the selling price — as above, there’s a difference!) of the most common elements of production. That knowledge made careful, thoughtful buyers out of that advertiser’s staff people.
You CAN do that…
…Or, you can call us
The business we’re in is helping clients buy production more thoughtfully and less wastefully.