Often in the process of engaging P3 the advertiser, marketer, finance or procurement professional will ask us to commit to how much this process we will provide will save them. They are looking for an ROI against our fees.

As we always explain, we cannot determine savings, if any, until we have undertaken the benchmark study, because not every relationship will yield savings. In some cases, problems with the service provider will be caused by under remuneration, leading to poor resourcing and therefore dissatisfaction with the service.

In the majority of cases, identifying poor practices, structures and processes on both the client and agency side and then addressing these have achieved significant savings. In our experience undertaking the benchmarking process and making the remuneration more transparent, with little or no impact on the relationship, have achieved moderate savings of 5% - 15%.

In fact, a more transparent remuneration will make the relationship stronger because it reduces the suspicion and fear many marketers have about their communications and creative providers.

In this way we often talk about P3 being an insurance policy first and an investment second.

We do not guarantee a return on investment, but we do guarantee peace of mind by providing an understanding and transparency into the complex and sometimes mysterious world of remuneration.

We have developed practices and benchmarks that have been tested overs many hundreds of millions of dollars of contracts and hundreds of relationships between major advertisers and their communications and creative providers.

And yes, in the majority of cases we have delivered opportunities for savings and a return on investment. Usually in getting better value in the form of a higher level of resource and service, rather than simply cutting costs. Because the easiest thing in the world to do is reduce cost - just cut your budget, but then you end up getting less for less. With P3, our clients can make cuts and know what they are getting less of in a way that it does not adversely affect their business.

Author: Darren Woolley

In a recent TV production estimate review, we noticed that the agency producer had allowed an extraordinatry amount of supervision hours on the project. There was a large post production, visual effects component spanning several weeks, but we thought "surely they do not intent to sit in a darkened effects suite day in and day out watching the effects being developed?"

How wrong we were.

It turns out that not only was the agency producer sitting through five long weeks of post, so was the creative team. This was 600 head hours of time. 3 people x 5 weeks x 40 hours per week. Perversely the creative head hours were covered in the retainer, so it was not costing anymore to have the writer and art director sitting through the whole process.

Not that they had to, as the best practice is to brief the visual effetcs company and then attend daily or twice daily work in progress meetings instead to review the work done and discuss the next step. This is how it is done in feature films. And it reduces the time from 40 hours per person per week to around 10 hours per person per week.

But back to the agency producer, who was charged out at a relatively high $240 per hour, this meant that having them sit through every hour of the visual effects added $48,000 to the production cost. This is on top of a senior copywriter and senior art director also attending. We asked the agency producer why were they attending as well and they said "Because the creatives cannot be trusted to not blow the budget". In anyone's terms that is a very expensive baby sitter. Luckily that does not happen every day.

Author: Darren Woolley

It is now mid-February and already we have been asked to benchmark the fees paid by four clients to their agencies because they believe they are paying too much. The thing that make these four unique is that they all have contracts that do not define what they get, just what they pay and in most cases they have not recorded what the agency actually delivered for the retainer beyond "developing and producing advertising ideas" or "planning and buying $X million in media".

This is like me saying "last year I spend $12,000 at restaurants" and asking you if I got good value for money. Well that depends on whether I used the money to buy 1,000 $12 take away meals, 2,000 McDonald's burger meals, or for one huge no expenses spared meal at Tetsuya's or est.

See, how can you calculate value unless you have either quantity or volume? And how meaningful is value without the context of the strategy or objectives of the company or business?

P3 does not simply benchmark cost, we benchmark value delivered and place this within the context of the objectives and strategy the client requires.

In regards to my restaurant bill, I enjoyed a full range of meals, from take away to a big breakfast to fine dining. While I may have spent more or less than others, in the majority of cases the restaurant / food services industry delivered what I needed when I needed it representing value to me. But then I got to choose the supplier when I needed them. I was not locked into one relationship like most advertisers are locked into with their agency providers.

What do you think?

Author: Darren Woolley

During last year we have had a number of highly successful projects involving changing the processes involved in advertising to deliver greater collaboration, efficiency and effectiveness.

This year we kick off our fortnightly P3 e-news looking at the issues and considerations marketers face in developing greater collaboration between their various communications service providers.

In the P3 e-news:
- delivering collaboration
- making more sense of media
- agency remuneration made easy
- television production advice

Delivering the benefits of greater collaboration

With increasing complexity advertisers are finding limitations in relying on media and creative agencies as their main advertising providers. Today, most advertisers are juggling five or more providers including direct marking, public relations, channel planners, promotions companies and more.

At best the management of this range of providers is time and resource consuming and at worst leads to a fragmentation in the brand communications with each provider doing their "own thing".

Identifying your key communications providers

The very first step is to identify the various providers currently on your roster. Often over time, advertisers will accrue a growing number of providers. In one case an advertiser had more than twenty graphic design providers through leakage outside the original panel of three.

Often in identifying the various providers, many advertisers will then go through a process of rationalisation to deliver economies of scale in their expenditure.

Defining your requirements and the role each will play

The next step is to then define your total requirements to fulfil your marketing plan. This includes budget, outcomes, planned campaigns and known activities.

Traditionally the activities would then be placed against the particular providers based on their core competency or the core service they were engaged to provide.

This is becoming increasingly difficult with most suppliers expanding and blurring their range of services to capture more revenue opportunities and technology assisting this in the digital domain.

Developing the appropriate structure to deliver outcomes

There are a number of different structural options for managing the relationships, from the traditional client agency relationship where the marketing team is responsible for the individual management and co-ordination of the various and usually small number of service providers to a collaborative adviser model where the service providers work collaboratively as advisers to the marketing team.

Many of these options were presented at a webinar in late 2006, which can be viewed by clicking here.

The right structural / organisational model depends on the culture, needs and requirements of the marketing team.

Implementing remuneration strategy to encourage collaboration

Many marketers attempt to create a collaborative working environment between their various specialist service providers. While this can be successful in the short term, invariably power struggles and demarcation disputes develop as the various providers compete for incremental revenue.

The most successful approach is to take a whole of relationship approach to the task including review of remuneration, service level agreements, reporting and deliverables.

In our experience, many of the attempts to create a more collaborative approach to service delivery is undermined by contracts and remuneration that rewards individual providers higher than collective outcomes.

Managing the process to deliver the desired outcome

Without a comprehensive approach to the way in which the service providers are engaged in the relationship, efforts to develop more collaborative working relationship are almost always doomed to fail through struggles over remuneration.

P3Biz has benchmarked, modelled and implemented a large number of remuneration and contract agreements to assist marketers build more sustainable collaborative environments. If you are interested in finding out more contact Darren Woolley or Tony Quail at P3 in Sydney 02 9279 4997 or Melbourne 03 9682 6800.

Making more sense of media

Looking for a new media agency? Perhaps wondering if your current agency is being properly remunerated? Want to benchmark how well your media planning is delivering?

Then you need to talk to Stephen Wright.

Stephen has more than fifteen years experience in media strategy and is the senior media consultant and director of P3Media. Contact Stephen by email at stephen@p3.com.au

Agency remuneration made easy

Facing a contract review or looking for a more effective way to remunerate your agency? Wanting to establish a more effective rate card of services? Or just wondering how cost effective is your advertising?

Then you should contact Tony Quail.

Tony is a commerce graduate and Chartered Accountant with a career that includes not only formal audit training at KPMG but also industry experience from the agency side, including Publicis Mojo, Simon Richards Group and the Clemenger Communications Group. Contact Tony by email at tony@p3.com.au

Television production advice

Planning your next big TVC campaign? Considering 3 quotes and not sure which is the best value? Need help deternining your next TVC budget?

You need to talk to Clive Duncan.

Clive has worked in film production, agency TVC departments and post production facilities for over 20 years, and is the senior TV consultant at P3TV. He has a unique appreciation for great creative and production qualities while also recognising the importance of delivering value for money. Contact Clive by email at clive@p3.com.au

P3 - helping people achieve commercial purpose through creative process

In the last few months we have undertaken millions of dollars in agency remuneration benchmarking on behalf of our clients. One of the core processes is benchmarking the agency salaries against the resource plan. This is were the agency or advertiser supply the number and type of resources to be provided under the retainer and using our salary benchmarks and the agreed overhead and profit margin we calculate the retainer.

The problem is that the salary benchmarks use traditional agency titles - account executive, account manager, account director, group account director, strategy planner, strategy director etc etc. Then there is the complexity of junior and senior roles, although you almost never see any junior resources anymore. (Perhaps it is lack of talent development or perhaps with the talent shortage university graduates do not want to be a junior anything or perhaps agencies have realised advertisers do not want any juniors working on their business).

But adding further to the complexity is the "new" titles that are increasingly common in agencies, or actually are more common in companies who are forgoing the title "advertising agency" for something as esoteric and brand consultants or communication specialists. Gone are the account directors in favour of Business Directors. Who's business are they directing the advertiser or the agency? Gone are the account managers to be replaced by Project Managers and Campaign Managers. The interesting thing is that the term manager and director are still maintained, while executive is more commonly project co-ordinator or facilitator.

It certainly makes benchmarking like-for-like salaries more challenging. In matching salaries to titles, some consultants use experience (how many years experience does the person have?) or job descriptions (what is the person's role and responsibility?). We use these and add one other, which is the context of the organisational chart for the agency and how this interfaces with the advertisers team. Any one of these and you can have a distorted view of the value of the individual, but combine together you get a very clear view of the relative value of the individual in that role.

The question of it that individual is worth that value can only be answered by the advertiser and if they are happy with the quality of the job that person is doing in that role.

One of the best titles I have seen is "National Research, Insights and Planning Director" which is not so much a title as a job description. But what are the best titles you have seen? Let me know.

Author: Darren Woolley