Is it time to remove creative agencies from the production process?

Darren Woolley

Darren Woolley is Founder and MD of TrinityP3, an independent strategic marketing management consultancy that assists marketers, advertisers and procurement with agency search and selection, agency engagement and alignment and agency monitoring and benchmarking. With his background as an 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.

Traditionally, when viewing the production process, the phases of conceptualisation and production have been bound together as a single entity. It was seen that the agency used at the beginning of the briefing, would also follow through with the production of the project.

This practise became the norm quite a while ago, back when the two processes were offered together by the selling agency. The pointlessness of the client buying the media and then having to get it developed themselves was identified and thus instigated a shift to the agency doing both. This could be included in their original commission with an added service fee.

But with new innovations in technology, coupled with increasing emphasis placed on cost effectiveness and accountability, the practice is changing once again. Advertisers in the UK seemed to have started this trend over a decade ago when they decoupled the process of production from their agencies. Efficiency was a major factor in this change, as television, print and also digital media can be outsourced to specialist production agencies who can deliver the required outputs much more cost-effectively than the agencies.

This new phenomenon of decoupling has taken two general directions:

  1. Through bypassing the agencies and going direct to the source. Companies are now forming direct relationships with the suppliers, where formerly the agencies were the point of contact. This includes suppliers such as Production Companies, Post Production Companies, Print Studios and Digital Workshops.

  2. Seeking out one of the numerous new ‘transcreation’ companies. These companies have sprung up recently, mainly from the UK and Europe, but are also increasingly global in scope.

Why you should decouple production from your agency

There is a tendency for agencies to place their reliance on the production process to subsidise their remuneration. This seems to be done to offset the high costs of conceptualisation and reflects the marketers’ reluctance to pay for idea creation.

With high volume, fast turnaround advertisers such as telco, retail and financial services, it can be difficult to achieve the required economies of scale with a single agency.

The new transcreation companies cropping up have put in a lot of work to improve the process, especially in workflow and approvals systems. This allows them to provide the processes on a faster schedule and with much lower overheads giving you an effective alternative at a lower cost.

If you tend to use multiple agencies when in the ideas phase, decoupling from your agencies would allow you to deliver economies of scale effectively by delivering production with a single supplier.

What is your best solution?

The way you go depends entirely on your production requirements. Some things to think about:

  • What do you spend the majority of your production budget on? Is it in one particular area of media, such as television or digital or is it more evenly spread?

  • How much do you spend? Does your budget require decoupling in order to deliver your economies of scale?

  • What is the cost effectiveness of your current production spending? Do your suppliers provide an efficient service for your spend?

  • What does your spend consist of? Is it multiple new productions or are you spending on reworking old templates and making different versions?

  • Are you targeting a single market or multiple markets? Are your requirements centralised or decentralised.

Case Study 1: Transcreation services across multiple regional markets

An Australian advertiser we have worked with used a network of agencies when creating its brand strategies. Following this, the organisation then developed a customised concept for each of its markets both internally and internationally. We were invited to assist them in reviewing agencies and what we found was the majority of spending was on production, especially within the regional markets. Although the advertising company was being offered low fees from its agencies, the ‘low’ cost was cancelled out by the overly high production costs.

From these findings we were able to develop a business model using transcreation companies and identified savings in production costs of a significant 32 per cent.

Case Study 2: Offshoring digital production services

A financial services company had engaged a digital agency with offshore capabilities to provide its digital requirements. We were asked to review the process and costs of this arrangement and found that the offshore capability was not fully utilised. With the digital spend on production increasing, the agency had opted to retain more and more of the work locally.

Our TrinityP3 assessment gave the client a variety of options for streamlining their processes. One of these was a financial model for decoupling their digital production offshore. This enabled them to reduce their total costs by over 50 per cent in the following year, without losing any quality or increasing risk.

Case Study 3: Decoupling television post production

We were approached by a telco client who was worried about the way its television production was increasing in cost. In reviewing their last three campaigns, we found the agency developing the campaigns was relying heavily on CGI effects, and that they were becoming more complex with each new campaign. After reviewing the schedule and spend for the next year, we suggested decoupling the CGI and post production work from the agency. In doing this our client was able to save 27 per cent on their post production costs.

Decoupling, of course, is not the solution for all advertisers. The process can take a lot of time and it also poses substantial risks if poorly executed. But for advertisers with the right requirements, spend and mix it can save a significant amount of money.

Of course, most agencies are against decoupling as it reduces their revenue.

If you have any other views on risks or issues involved with the decoupling process please leave a comment.

Tags: agency management

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