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Divide and Conquer

Wednesday May 18, 2011

“Does every advertiser need a production agency?” At a recent advertising industry event in London, nobody came close to tackling the question for the collected buyers, advertisers, consultants – and a few suppliers. But one surprising fact did emerge. ‘Decoupling’ – moving production services from traditional full-service advertising agencies to separate specialist ones – has only been done by 10 per cent of client businesses. So 90 per cent have left their ad production with a more conventional process. Why? Do advertisers want a slick, cost-saving 21st century answer to delivery, or the old Mad Men solution of in-house waste, mistakes and repetition? With economies of scale and dedicated software, press production can now be handled by stand-alone agencies, which interact directly with advertisers.

The decoupling strategy has evolved and changed massively since it was pioneered by ICP in 1988. The alternative was a collection of locally based solutions with duplicated materials, incorrect technical specifications, moved logos and company guidelines not being adhered to. Centralisation was the answer, a formula adopted by companies such as TAG and others. Originally, decoupling revolved around commodity-based deliverables such as film to publications or the printing of collateral materials. The next phase embraced the creation of a master asset to cover media schedules. As decoupling evolved into ‘un-bundling’, other parts of the production supply chain came into focus – those traditionally considered an intrinsic part of the creative development process, such as image manipulation (retouching).

Gaining momentum

The idea gained momentum when broadcast production came under the spotlight, from the more functional areas such as the creation of master commercials for use around the world, then into more exacting post-production. The next phase had decoupling affecting advertisers’ own HR strategies with advertising departments contracting in their own producer function, negotiating on the advertiser’s behalf with the open supply market in broadcast and print media. Production suppliers now cover decoupled delivery across print, broadcast and online media with the benefits of lean processes and seamless project management across channels supported by technological solutions to manage and deliver assets. The latest evolution has advertisers establishing their own preferred production supplier lists (such as Unilever’s recent decision to build its own roster of TV production companies), or taking responsibility for their own creative development. On the face of it, decoupling has moved more and more into the creative territory so fiercely protected by major advertising agencies. In reality, decoupling has simply come of age. The key beneficiaries have been the global brands distributing advertising assets into their local markets – and the benefit is magnified where the advertiser can operate a centralised model avoiding the costs of duplication.

Production under scrutiny

So the benefits aren’t just process-based. Using web-based tools for ordering, real-time schedule tracking and delivery saves time, and potentially up to 65 per cent in overall costs associated with the production and distribution of advertising materials – including agency   fees. Of course, ad production lies at the less sexy end of the process. But to a procurement mind, saving money is sexy, so it’s no longer a surprise that ad production is under scrutiny. Ask any marketing or procurement professional whether they embrace the notion of eliminating unnecessary costs and you’ll get unity. Production is a vital part of the communication process. This is the point at which months of hard work are delivered to the target audience. An inefficient process at this stage can have huge financial implications. And for international campaigns the stakes are even higher. It’s important that brand consistency is maintained globally. While local laws and marketing customisation must be factored in, the sheer complexity of production at a local level can result in errors, delays and increased cost. And, more importantly, have a damaging effect on the value of a brand. Richard Woodford, advertising & marketing category manager at News International, and co-chair of ISBA’s Compag group notes one of the key concerns: “Procurement people don’t understand the complexity of the supply chain and the nature of the category when swimming upstream” – particularly in the traditional space around TV. He agrees that specialist suppliers are becoming more and more important: “You might want transparency, but because of who you are using, you won’t get it. There is a place for procurement to either employ experts to support them, or spend some time really understanding a service sector built on years of working together in a certain way”.

Smoke and mirrors

Which goes back to the conventional model being used, apparently, by 90 per cent of the world’s advertisers. The international agency network is a breeding ground for unnecessary costs. Duplication of effort and materials makes a big dent in the advertising budget, diverting into unnecessary production processes. Big agencies love building empires, which underpin the slightly opaque methods the agencies use to generate revenue. The more local offices are involved, the more revenue the account director can generate. Of course, there’s a solution. You can replace the local network by buying into a centralised model. But the big agencies are experts at smoke and mirrors. They would have you believe that their’s is an independent solution to the local office model, but you can hardly call a wholly owned subsidiary independent. And make no mistake, a heavy three-line whip exists within the major holding companies to ensure that when a client looks for a decoupled solution, it’s decoupled into their own production brand. This offers little in the way of value to the advertiser, but retains a massive income stream within the agency. As the debate rages about quality versus cost at every stage of the process, it is important to emphasise the value of the involvement of procurement professionals early on in the process so marketing can work with them to deliver value and the very best possible results for the brand. Woodford says this level of harmony is hard to come by: “Blundering blindly in this space can cause chaos, increased cost, distrust – and it can damage the name of procurement.” He believes that with real subject matter experts at the helm, there are plenty of benefits, including:

  • Quality control. Ensuring brand equity is maintained through consistency at every consumer touch-point.
  • Speed to market. Eliminating duplication of effort and streamlining the process through real-time tracking and delivery.
  • Freeing up time. For local FTEs to focus on core competencies.
  • Lower costs. As a result of transparency in both activity and expenditure.

In the end it’s a horses-for-courses argument. Harnessing the right level of specialisation from your advertising supply chain means that the right people are doing the right job (that they’re best at) at every stage of the process. And making sure that the best advertising ideas are produced in the most effective way. Isn’t that what it’s all about?

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