This post is by Darren Woolley, Founder of TrinityP3. With his background as analytical scientist and creative problem solver, Darren brings unique insights and learnings to the marketing process. He is considered a global thought leader on agency remuneration, search and selection and relationship optimisation.
Since January 2000 we have been offering our clients a television production cost assessment service. This service is designed to provide marketers and procurement with a framework for managing the cost and quality of their television advertising production investment.
The television production cost assessment service includes:
- Reviewing the creative brief and assisting in setting the production budget and timeline expectations
- Reviewing creative concepts from the agency against the budget and timeline requirements
- Evaluating agency director and production company selections
- Assessing the proposed production methodology and cost
- Assisting marketers in negotiating with the agency and production company
- Reconciling final production cost against proposed cost and identify insights for future improvement
In the past 18 months we have increased the number of regional clients that have used this service. One of the questions that often arises prior to our engagement is what savings can they expect us to deliver.
We often quote savings of between 10% and 15%.
We do not get remunerated on savings, but we are very happy to have our services evaluated on value. The easiest thing in the world is to drive down the price of television at the expense of quality. And no one will thank us for reducing cost if the result is a commercial that everyone is too embarrassed to watch.
In the first four months of 2013 we have been particularly productive. Between January 1 and April 30 2013 we have reviewed 25 productions. Of these, 11 were in Asia and 14 in Australia. For the purposes of this discussion, we provide these services in Japan, South Korea, China (including Hong Kong and Taiwan) Philippines, Indonesia, Singapore, Malaysia, Thailand, and Vietnam.
The 25 productions equated to more than $12 million in proposed production costs and the output was 63 masters. The average cost per production is just under $500,000 and the average cost per master produced is a little under $200,000 each.
Identified savings = 9.5% or $1.2 million
The savings identified were just under $1.2 million or 9.5% of the total value of the productions. This equates to an average saving of around $47,700 per production. With the average fee of $3,400 per production (fees are based on production budgets and range between $1,600 – $5,200 per production) this equates to a 14 times return on investment.
ROI = 14 times
Asia versus Australia
While not a statistically significant sample and acknowledging the sampling is not random, and productions are where the advertisers had identified a need for assessment and management. However, the difference between the Asian and Australian productions are interesting.
|No. of productions||11||14||25|
|No of masters||37||26||63|
|Average identified savings||$71,808.55||$27,811.43||$47,170.16|
|Average identified savings||12.81%||6.20%||9.48%|
While the total production value is about the same, with less productions the average production cost was higher for Asia. But with more masters produced the cost per master (or commercial) was lower than in Australia. The most noticeable difference was the average cost per production of identified savings. Asia was more than double the Australian average identified savings.
Does this mean that the agencies in Asia were less diligent in preparing their production estimates than in Australia?
This is a phenomenon we have noticed in markets we have operated in over the past 13 years. When we have been working with our clients over a period of time the average identified production savings will decrease over time as the agency becomes more compliant with the rigour of the TrinityP3 production assessment process.
TrinityP3 has offered production assessments and management in Asia since 2008 when we opened offices in Singapore and Hong Kong. In many cases, our clients in Asia will operate over a number of markets with a different agency office in each market and a different agency team,
In this particular sample, most of the productions and agencies have had three or less assessments within the past 2 years, Compared to the Australian market, where we have operated for the full 13 year, and where the clients and agencies have worked with TrinityP3 many times.
Moving from Investment to Insurance
With all of our longer term clients we offer an annual summary of results of our production assessments. In one particular case the procurement team noted the fall in identified savings and suggested to marketing that our service was no longer financially viable as the return on the investment in the services had fallen to an ROI of 5 from a high of 18 over the past 3 years.
The marketers took the advice and we parted company amicably, as we do not see the sense in providing a service which is not seen to add value. But 18 months later we were called back to review a production that was seen to be particularly expensive. On reviewing the creative and the proposed quote, we saw many of the hidden contingencies and inflated costs from the agency.
In reviewing the report with the CMO, we asked if we could look at all future productions, as we had done before. I cautioned him that as always we could not and would not guarantee savings and that the results and the return on investment may fall again, perhaps even quicker this time as the agencies were familiar with the process. He told me that he would just have to think of this as an insurance policy and not an investment.
Interested to hear your thoughts on the production assessment process. Leave a comment to let me know.