Issue 83, 30/10/07
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With creative agency remuneration, and in most cases media agency remuneration, based on resource cost by an overhead multiple by a profit margin, an essential step in setting the remuneration level of an agency is clearly defining the scope of work.
In this edition of the P3 e-news we look at why defining the scope of work is essential and how you can develop your scope of work to get the best value out of your marketing spend.
defining the scope of work
The scope of work will determine the tasks to be delivered, which will determine the level and type of resources required, which will then determine the cost of those resources, which will then determine the overall cost to the agency.
Yet defining the scope of work can be a difficult and apparently almost Herculean task for some marketers. The usual problems with determining scope of work are:
1. The marketing plan does not currently exist
2. The budget is unconfirmed or changing
3. The details of the marketing plan are unclear
4. The requirements are defined by the business, not marketing
Let’s look at some of the different ways a scope of work can be developed.
Defining the scope of work by budget
If there is a budget allocated for advertising and promotion within the marketing budget, then at the very simplest and highest level this can be compared to the previous year’s budget. Simple allocations of media versus non-media spend can be factored into the equation and a proportion of the budget allocated on the basis of the variation to the previous year’s resource plan can be calculated.
While quite rudimentary, this is based on the fact that many agencies will work out revenue projections based on the advertisers proposed spend along the lines of the traditional media commission for media agencies or extraction rate for creative agencies.
Defining scope of work by deliverables
While the budget or proposed spend can define a basic volume of work, it does not take into consideration the complexity, which can impact significantly on the resources required.
Only by developing a marketing / advertising plan and projecting the type of deliverables required can you begin to develop a detailed scope of work from which the agencies can develop a proposed resource plan. Even in the media space, a number of smaller media campaigns can be more resource consuming than one major campaign, while online media planning is significantly more resource consuming than many traditional media campaigns. Even for creative work, allocating the type of deliverables (TV, Online, Press, Magazine etc) based on the previous behavior can be more insightful than having no scope at all.
Defining scope of work by strategy
If trying to lock in the deliverables proves too difficult or constraining, then another valid approach is to define the strategic requirements by brand or category and develop a scope of work based on past requirements and remuneration for similar strategic deliverables.
This could be defined a number of ways, such as “new product launch”, or “Tier 1, 2 or 3 activity”, or “Maintenance” etc. Each of these would then be related back to a previous similar activity and the remuneration paid to the agency. This obviously requires a level of transparency into the cost paid in the past.
Managing changes to the scope of work
Where the marketers are unable to provide a defined scope of work, there is often a move to secure an “all in” remuneration model.
While this may appear easy, the problem is that without a base scope of work initially, even with the best intentions, there will quickly develop conflict between the agency and advertiser if the scope outstrips the resources covered by the remuneration level. If you have no scope of work and the agency is not complaining about the level of remuneration, it could be that the level is about right or possibly much higher than required.
Transparent remuneration based on scope of work
P3 has developed numerous models and benchmarks for defining scope of work, resource levels and remuneration for a vast number of advertisers. Each remuneration model takes into consideration the advertisers needs, circumstances and particular situation, creating flexibility, transparency and manageability.
To find out more, contact P3 in Sydney 02 8399 8922 or Melbourne 03 9682 6800 or email email@example.com
book your seat now
The P3TV Production Workshops for Advertisers, run in conjunction with the Nine Network in Melbourne and Sydney are booking fast.
Sydney – Wednesday 28th Nov, 9-1pm
Melbourne – Friday 30th Nov, 9-1pm
This half day workshop run by Darren Woolley will give you a better understanding of the tv commercial production process, help you make more informed decisions and participate more effectively.
Booking forms will be posted this week, or click here to download a booking form from our website, or email firstname.lastname@example.org
are you left brain or right brain?
P3 acts as a link between the left brain of commerce and the right brain of creativity. Click here to find out more about our left brain/right brain philosophy.
But are you left brain or right brain dominant? Can you access both your analytical and your innovative brain functions equally? Click here to see one of the more popular test sites currently on the internet. Check it out and discover which side you favour. As marketers and advertisers it is more likely you are right brain dominant or equally dominant. But let us know your results.
maximise the value
Advertising is one of the most potent tools a company can use to drive their business. For advertising to maximise its effectiveness, it is important that there is an environment of trust between advertiser and agency.
The AFA has summarised just a few of the factors in getting more from an agency in their booklet ‘How you and your agency can achieve dizzying heights’. An ideal thought starter for anyone interested in maximising the value of the relationship between advertiser and agency.
Order one today by downloading the booking form from the P3 website.