Blog | TrinityP3

Value based agency remuneration considerations for direct response and retail advertisers

Posted on January 27, 2012 by Darren Woolley

I had an interesting conversation with a client in early December last year as they had contacted me to discuss their media and creative requirements to meet their business growth objectives in the coming year.

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.

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Posted in agency remuneration / compensation, agency solutions, customer relationship management, strategic management | Tagged agency compensation, agency remuneration, agency solutions, CRM, crm model, customer relationship management, Darren Woolley, direct response, strategic management, TrinityP3, value based agency remuneration | Leave a comment

Ten tips for managing advertising production costs more effectively

Posted on January 25, 2012 by Darren Woolley

It is interesting that 12 years ago when I started TrinityP3 (Simply P3 then) that the majority of our work was in Production Benchmarking and Management. In fact some of our earliest clients still think of us as production consultants. Today, production makes up less than 15% of our business regionally, but in the past 6 months we have had an increased number of major advertisers come and enquire about production cost assessments, especially television and digital production.

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.

Top 10 tips for managing advertising production costs

View more presentations from Darren Woolley

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.
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Posted in agency remuneration / compensation, agency solutions, industry news & trends, marketing process optimisation, print production, social media & digital marketing, strategic management, television & electronic production, Top 10 | Tagged advertising production, agency solutions, cost assessments, Darren Woolley, digital production, managing advertising production, marketing process optimisation, production benchmarking, production costs, strategic management, TrinityP3 | Leave a comment

12 trends in strategic marketing management for 2012

Posted on January 23, 2012 by Darren Woolley

This first appeared as a guest blog in BizCommunity in South Africa and can be seen in full here.

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.

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Posted in agency remuneration / compensation, agency solutions, data & direct marketing, Evalu8ing - Relationship Performance Monitoring, green marketing & sustainability, industry news & trends, interesting observations, media planning & buying, print production, social media & digital marketing, strategic management | Tagged agency compensation, agency remuneration, agency solutions, Darren Woolley, media buying, media planning, relationship performance monitoring, social media and digital marketing, strategic management, strategic marketing management, TrinityP3 | Leave a comment

What is the industry benchmark cost of producing a television advertisement?

Posted on January 20, 2012 by Darren Woolley

The perennial $64,000 question. Or in many cases a damned sight more. The fact of the matter is that it usually costs whatever the budget is that has been assigned by you – the client. In many instances, it costs more.

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?

The cost of the television commercial is driven by the concept itself and the marketers budget. The budget is set by the marketer based on the level of investment and the potential return like this spot for Hahn.

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:

The projected ROI
The planned media budget for the first year or phase of the campaign
The category in which you conduct your business
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.

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Posted in agency solutions, strategic management, television & electronic production | Tagged agency solutions, benchmark cost, cost benchmarking, Darren Woolley, electronic production, media budget, strategic management, television advertisement, Television production, TrinityP3, tvc production | Leave a comment

Better agency pitch practices for better client / agency relationships

Posted on January 18, 2012 by Darren Woolley

I feel like I am constantly seeing reports and articles about the flaws of the advertising agency pitching process. A common theme of these articles is the fact clients often select agencies based on their creative potential but usually fire them for relationship and service related issues.

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.
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Posted in agency search & selection, agency solutions, strategic management | Tagged agency pitch, agency search, agency selection, agency solutions, client agency relationships, Darren Woolley, pitch practices, pitch process, process improvement, strategic management, TrinityP3 | Leave a comment

TrinityP3’s Top 10 most popular strategic marketing management posts of 2011

Posted on January 16, 2012 by Darren Woolley

2011 was a challenging year for marketers everywhere. We worked with many of our clients both regionally and globally discussing and addressing a wide range of issues including: marketing agency search, agency compensation, agency selection, agency contracts, business strategy alignment, advertising process improvement management, client agency relationships, supplier performance management and production cost benchmarking.

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.

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Posted in agency remuneration / compensation, agency solutions, Evalu8ing - Relationship Performance Monitoring, interesting observations, media planning & buying, print production, social media & digital marketing, strategic management, television & electronic production, Top 10 | Tagged advertising agencies, advertising production, agency compensation, agency remuneration, agency solutions, Darren Woolley, marketing management, media benchmarking, strategic alignment, strategic management, strategic marketing management, TrinityP3 | Leave a comment

Selecting the right agency roster structure to achieve strategic business alignment

Posted on January 13, 2012 by Darren Woolley

It is amazing how often a conversation about tendering for a new agency occurs without any substantial reference to the overall roster structure. The desire to appoint a new media agency, a new creative agency or a new digital agency is often made in apparent isolation. In late September I had a discussion with a Marketing Director about the desire to review all of their “major” agency suppliers – this being the three agencies where almost 90% of their budget was currently invested.

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?”

TrinityP3 Agency Roster Structures

View more presentations from Darren Woolley

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:

The Full Service Agency
Holding Company Model
Created Customised Agency
Lead Agency
Strategic Group
Strategic Tier
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.

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Posted in agency search & selection, agency solutions, strategic management | Tagged agency roster, agency search, agency selection, agency solutions, Darren Woolley, roster structure, strategic alignment, strategic business alignment, strategic management, supplier alignment, TrinityP3 | Leave a comment

The unseen supplier contract in TV production that exposes marketers to legal disputes

Posted on January 11, 2012 by Darren Woolley

As “the marketer”, every time your agency issues a purchase order on your behalf to the production company making your TVC, you are bound by the SPAA (Screen Producers Association of Australia) set of terms and conditions (let’s call it a contract), unless of course your contract with the agency strictly forbids your agency from entering into third party agreements without your written permission. (Increasingly common and cause for concern for agencies approving the SPAA without your written approval).

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)

It is likely that the footage from this TVC made for Bonds in 2011 may not actually belong to Pacific Brands if the production was commissioned by their agency using the current standard SPAA agreement.

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.

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Posted in agency solutions, television & electronic production | Tagged agency contracts, agency solutions, Darren Woolley, production contracts, production costs, scope of work, SPAA, strategic management, supplier contract, Television production, TrinityP3, tvc production | Leave a comment

When should an advertiser pay pitch fees when selecting a new advertising agency?

Posted on January 9, 2012 by Darren Woolley

There are times when an advertiser should go to the market to select a new agency. But this is not a process that should be entered into lightly. Going out to the market place comes with several risks and costs to both advertisers and their agencies. Before we consider if the advertiser should pay pitch fees, lets look at the cost to the agencies, which include:

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.

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Posted in agency remuneration / compensation, agency search & selection, agency solutions | Tagged agency compensation, agency remuneration, agency search, agency selection, agency solutions, Darren Woolley, new advertising agency, pitch fees, pitch process, strategic management, TrinityP3 | Leave a comment

To pitch or not to pitch? The issues every marketer should consider before answering this question.

Posted on January 6, 2012 by Darren Woolley

Undertaking an agency review or “pitch” should only be done for the following reasons:

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.