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Top 10 reasons advertising production is the new cost focus for marketers

Advertising Production
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This post is by Darren Woolley, Founder of TrinityP3With 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.

Is it just me or is production the next hot topic after media transparency and data security when it comes to marketing? There is not a day goes by when there is not a new article, podcast or story on advertising production and the issues, innovations and ideas on the best way to implement and manage production in the ‘digital age’.

While I recognise the irony of me writing this, TrinityP3 has been observing, commentating and benchmarking advertising production for almost two decades and we have seen the trends come and go.

So what are the drivers that are behind the latest focus on advertising production and why is it now that the category appears to be getting disrupted? Well I can provide at least ten things that have come together at this point to make this happen.

Some have been evolving for more than a decade, while others have appeared as if by magic, but directly or indirectly they are due to the amazing technology innovations that are transforming marketing communications and advertising production in particular. So here they are in no particular order.

1. The DoJ investigation into agency production practices in the USA

When the Department of Justice announced it was investigating TV advertising production bid rigging by agencies and their holding companies in 2016 it placed the production on the industry agenda. There is nothing like a criminal investigation to get an industry to take notice.

But the practice of rigged bidding has been going on for years to a greater or lesser extent as agencies have tried to position their preferred director or production house on price.

But in this modern version the bidding process is allegedly being used to position the agency’s (or associated holding company’s) production company as being competitive on price and effectively squeezing out the independent production suppliers from the process, delivering a greater share of the client’s budget to the agency.

2. The rise of the production specialist companies

Production specialist companies have been around for years, but you know it is a money making proposition when the holding companies create their own production specialist companies such as Craft (McCann) and Hogarth (WPP). So why has this had such an impact on production?

Previously most of the production specialists were positioned as transcreation companies who would work with the creative agencies to take the outputs of their advertising process such as television masters, print artwork and the like and then not just translate but culturally align the work (often originated in English with a Western Cultural perspective) into a multitude of languages for a multitude of countries to maximise the effectiveness of a global campaign.

But the latest iterations see these production specialists taking the production responsibility from the agency and producing all aspects of the creative idea including the original masters and all of the variation at often a fraction of the price the agency could produce it.

3. The increase in production volume and decreased cost

Digital and social media channels have ferocious appetites for creative content. This combined with the ability to serve particular creative executions to particular target audiences has meant that the volume of creative assets required has increased exponentially.

Gone are the days of a television commercial, radio and perhaps some print and point of purchase materials making the total campaign.

Now there are multiple versions of television assets for pre-roll and online along with hundreds of digital banner ads and thousands of social media updates. So with this increase you would expect to see an exponential increase in the cost of production, but you would be wrong.

Because the cost of this media is not only lower per version of creative because of the variations but also lower in general. Therefore to maintain supposed working to non-working ratios the budget for their advertising assets has fallen, even though many agencies have tried to maintain the premium arguing that the economies of scale principle does not apply in this case.

4. The trend towards in-house agencies for major advertisers

Many marketers are either planning or have taken an increased number of agency services in-house because it provides them significant savings, greater control and improves speed to market.

But the reason for the cost savings is two-fold, being the reduced cost and accessibility to the production technology and the non-competitive cost models maintained by many agencies.

It is interesting that of all the companies that report having in-house agency capabilities, the vast majority do not actually have in-house strategy and creative, but instead have focused on bringing the production component in-house.

The reason is this is where the greatest savings are often delivered and also because they are able to continue to access the more specialist strategic and creative resources through their agencies rather than try and recruit and maintain these in-house.

5. The decrease in the cost of production technology

Technology has two effects on price. The first is something we have all witnessed and that is as new technology matures the cost of that technology decreases. The second is that technology can also make processes faster and labour more productive through automation and workflow management, reducing the cost.

But up to now there has been a disincentive for agencies to invest in these technologies as any reduction in cost of production would have lead to a corresponding reduction in their fee making this investment a disincentive.

This is because agencies continue to charge their clients on a cost plus basis and therefore any investment in improving productivity delivers a double whammy in a reduction in fees and an inability to recover the technology investment cost.

An excellent example is agencies that insist on charging their clients for a studio operator to resize their digital display ads manually when there is technology that will automate this process at a fraction of the cost.

6. The focus on cost of agency retainers and fees

While procurement and finance can be particularly good at focusing on the total cost of the agency retainer and the cost per FTE, when it comes to production costs most will manage to simply negotiate a lower priced rate card on an hourly or unit basis.

But as we know production costs can vary widely and a half price rate card for a production that takes three times longer delivers the agency a 50% premium.

If has often become the practice that when the agency has been negotiated into a discount retainer to win the business, the most obvious strategy is to use what ever technique possible to recoup the reduction in fee on the production.

This is an ideal opportunity because the volume of work often means that incremental increases across all production projects delivers significant increases and often flies under the radar of procurement and finance. (In one case the marketers were complicit in approving production inflations after the agency came begging poor).

But also production can be incredibly complex making it difficult for marketers to make an informed decision on costs at the time of approval. This combined with timeline pressures and approvals of incrementally higher production costs becomes the agency norm.

7. The increased demand for greater production agility

The hot topic in many marketing teams is the desire to become more agile in the delivery of their marketing production. Shorter deadlines and greater flexibility is leading to last minute changes without the usual cost imposition meaning that agencies are under pressure to deliver faster and cheaper, while pride in their work compels them to maintain quality as well.

The often-traditional linear or cascade approach to production that operates in most silo agency production departments and their processes means that the only way of delivering this is to increase resources, as this allows them to increase costs to the client through the cost plus compensation model.

But this is counter to the marketers desire to reduce not just time to market but also cost. This misalignment and often-conflicting expectations leads marketers to look for an alternative. (See in-house agencies or production specialists).

8. The rise of content marketing and production

Content marketing has been around for more than a century, but the Internet and digital technology has meant that brands and organisations can become publishers and broadcasters of their own content via video, podcasts, blogs, white papers and more leading to an explosion in the volume of content being created.

While some organisations create this content in-house (See in-house), others have turned to their advertising agencies to either create or supplement the creation of this content. But advertising production is not like a publisher or a broadcaster, where systems and processes are in place to produce large quantities of high quality content fast and on limited budgets.

Advertising agencies are more likely to produce one-off campaigns or executions rather then a series of long form video, or writing and publishing dozens of blog articles or podcasts a week.

The process and cost structure of the agency makes this type of mass long form production expensive because the process is labour intensive, compared to publishers and production companies who produce hours of video content or hundreds of pages (web or print) of content.

This is why in response there was a rise of the content agency, usually created from a heritage of publishing or video production or both.

9. The ability to off-shore production

It is interesting that at a time when the industry trend is to in-house production capabilities for many global and multinational organisations this means having resources in-house but also off-shore to take advantage of skilled resources in lower cost economies and in different time zones.

The ability to off-shore production needs is not only in-house of course, with many suppliers offering off-shore production facilities and providing lower cost quality resources in overseas markets.

There is also the advantage of working in time zones that means that the work is being undertaken overnight. These options exist in an increasing array of professional and technical sophistications from simply producing content overseas on your behalf to fully integrated and collaborative production facilities operating in real time.

Everything from digital and technology builds to print artwork to video post-production to complete video productions can be managed this way taking advantage of the global production supply chain. Of course each has its own strengths, weaknesses and challenges, but the maturity of this option means there are now more options for all.

10. The role of production consultants

Yes production consultants like TrinityP3 have had an impact on turning advertisers attention to finding new, faster, cheaper ways of producing the content they need as their needs have changed. These consultants are not only found exterior to organisations, but have for many years existed within these organisations, overseeing the production of the advertising content.

The ideal role of the production consultant is to provide an independent, often third party advisor. Not just on the production at hand, but also looking for the longer-term transformation opportunities to meet the evolving needs of the clients they work for or with.

With the rise of the adtech and martech platforms that can help to manage the workflow of marketing content and assets within the organisation, it is the production consultant who can provide the business case and have input into the selection of the right solution for the organisation’s needs.

At the core of this industry trend is not platforms that put all of the control with the advertiser, but the ones that allow the advertiser to manage the collaboration of the various production partners and to maximise the value of the assets the production process creates.

Need an independent assessment of your current advertising production processes and costs or want to evolve your production process to deliver improved cost and time efficiencies then read more here.

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Darren is considered a thought leader on all aspects of marketing management. A Problem Solver, Negotiator, Founder & Global CEO of TrinityP3 - Marketing Management Consultants, founding member of the Marketing FIRST Forum and Author. He is also a Past-Chair of the Australian Marketing Institute, Ex-Medical Scientist and Ex-Creative Director. And in his spare time he sleeps. Darren's Bio Here Email: darren@trinityp3.com

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