edition 28 august 17 2004

beware of the budget busters!

While we hope this is not a wide spread phenomenon, P3TV have recently been involved with a significant number of productions where the estimate is more than 50% higher than the original briefed budget.

In this edition of P3 e-news we give advertisers a practical way to manage the agency to ensure the agency works within the budget without compromising creative excellence.

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managing your agency to manage your budget

One of the more frustrating aspects of television production is the cost exploding beyond the budget. Many advertisers are told by their agency that the budgets are not high enough and they should be increased.

Television production costs are not increasing

P3TV recently provided the AFA evidence that television production costs, in the form of crew rates and equipment hire, had increased 8% and decreased 3% respectively in the past 4 years. Television production costs are not increasing more than CPI. The problem appears to be that expectations of television production costs are increasing.

One way to control production costs is to implement this process with your creative agency:

1. Set and provide a budget

Based on your total media spend, provide the agency with the production budget you believe is warranted to achieve the marketing task at hand. Guidelines include 10% - 15% of your total media budget, past expenditure, etc.

Put the budget in writing in the brief and make the agency aware that this is the budget they are to work with.

2. Ensure each concept is accompanied by a ballpark cost

When the agency presents concepts to the brief, ask the agency to provide ballpark estimates for each concept. These ballpark figures are prepared by the agency producer and do not require the agency to obtain external quotes. At most the agency producer may call an external supplier for advice.
The ballpark figure should also cover all permutations and combinations required as part of the final production, including cutdown versions, various media options, etc.

Most professional agencies have the producer check that the concept is achievable within the budget before the concept is presented, so this should not require additional work by the agency.

3. Hold the agency to 10% - 20% of the ballpark cost

The agency should be informed up front that if the final estimate is more than 10% to 20% higher than the ballpark supplied at concept presentation, the difference is to be funded by the agency.

The choice of 10% - 20% variance depends on the category, budget size and production type. Some categories are more difficult to ballpark than others, though most experienced agency producers can create an accurate ballpark estimate for long-term clients.

For lower budgets, say under $300,000, a 10% variance is $30,000 or less, so lower budgets should have wider variance, while higher budgets should have lower variances.

Techniques like in-camera and post-production visual effects can be complex and difficult to cost without the extensive input of the specialist supplier.

You can use the benchmarks to judge the value of the concept

Of course, the agency could present a number of ideas, but using the ballpark figure you can ensure that at least one of them is within the budget and also be able to judge if the other ideas are worth the cost if they are above your budget.

But how do you know if the agency is over quoting a concept? You get P3TV to benchmark the estimate to ensure it represents good value for money within your budget.

For more information on how to implement this process with your agency or for assistance benchmarking your television production costs, contact P3TV by sending an email to tv@p3.com.au

talking remuneration

 

P3 founder Darren Woolley is speaking on Agency Remuneration at the B&T Advertising & Marketing Summit 2004.

The Summit is to be held on October 26 & 27 at the Sydney Convention and Exhibition Centre.

For more details click here to go to www.acevents.com.au/ad2004/

   

knowledge is power


Melbourne based, Brendan van Maanen has extensive strategy and account management experience at a wide range of advertising agencies in the Melbourne and Sydney market.

This experience and his Bachelor of Education makes Brendan a valuable resource to P3 and our growing list of clients.

To discuss your training needs contact Brendan by email brendan@p3.com.au

     

make more of your media budget

 

Mark Chesterfield from P3Media Benchmarks has developed an easy to use checklist of ways to ensure you are getting maximum value from your media budget.


To ensure you recieve your free copy of the Top 10 Media Checklist register now at media@p3.com.au

 

 

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