It is not done purposefully …or with the intention of deceit.
In fact, the Agency will tell you it is the only way to manage through the complexity given the incredibly tight deadlines they are working within.
With that said, even though marketers continue to have strong suspicions that their production house costs are higher than they need to be, it is the lack of transparency in the bid process that makes it difficult for them to fully understand the inefficiency and do anything about it.
The truth is clear
The truth is that production house costs are just too large to ignore.
They can account for up to 70% of the cost of any given video project and remain one of the largest opportunities for marketers to be more cost efficient. In fact, our work has shown that organizations consistently overpay for these services by as much as 25% or more.
However, despite ongoing suspicions, organizations continue to hand over control of the bid process to the Agency and rely on the same old traditional production house bid process to maintain proper communication flow and maximize cost efficiencies, never realizing that there is an inherent back-end nature to this process that actually works against them.
Working within an agency-driven process can be difficult; nowhere is this more evident than when bidding begins on a large-scale video initiative.
This is when the agency starts to take complete control of the timelines, executional details and information flow and marketers are put on a “need to know” basis.
In some ways this is good as the agency’s role is to work through the logistics, solve the smaller issues and minimize any unnecessary noise.
However, in other ways, this is bad as the lack of transparency eventually leads to inflated costs, the inefficient use of timelines and marketing teams that are put in the untenable position of being forced to make major, time-sensitive decisions at the tail end of the process without fully understanding the range of viable options available or their potential impact.
The 3 areas in the bid process that are the biggest culprits
It really begins with the Agency bid spec document.
This document is usually put together in haste and will often go out to production houses with a fair amount of ambiguity still in it. Shortcuts like this, so early in the process, have major repercussions down the line. It not only creates the real possibility for misalignment between the Client and Agency before bidding has actually started but it also makes it extremely difficult for production houses to accurately bid. This forces them to pad their bids in order to cover the unknowns.
Next is budget setting; which is quite frankly an issue unto itself.
While the agency does provide a preliminary rough cost for production house services in the bid spec, it is usually just a simple allocation of the larger marketing budget. This number then becomes the final cost target given to production houses even though it was never rooted in the actual scope of work. The issue being that this number is typically much higher than it needs to be.
Then comes the selection process.
Once bidding starts, communication between the Client and Agency comes to a complete standstill. The impact of this usually does not come to light until the award phase when previously unannounced changes come to bear, pressure to make last-minute decisions that can have considerable budget or creative implications takes hold and a lack of full disclosure of competitive bids leaves you with the feeling that agency biases may have somehow kicked in.
Is this the definition of insanity?
If in fact the transparency and cost issues are real, why haven’t we seen more systemic change in the industry. The answer to this question is 4-fold;
First and foremost, it has always been done this way so many just consider it to be the accepted practice and rarely challenge it.
Secondly, production house costs are one of the least understood budget areas for marketers and therefore there is an over-reliance on the agency to manage these costs.
Thirdly, production house procurement is widely considered to be part of the creative process and with that there is a certain level of acceptance of inefficiency out of fear of negatively impacting the creative or damaging the agency relationship.
Lastly, agencies are not complaining. In fact they are the ones insisting there is no better way. They will claim to be equally concerned with cost efficiency despite the fact that it is in direct conflict with their primary goal of creative excellence.
The opportunity
The good news is that there are several ways organizations can take more control of the bid process in order to mitigate transparency issues and improve cost inefficiencies… and do so without impacting the quality of their creative.
Solutions range from building in simple safeguards into existing bid processes all the way to implementing alternative bidding models. Regardless of the solution, they all center around one or more of the following core pillars; process optimization, the introduction of enhanced bidding tools and education & training.
Here is where we can help
Haynes-Vozza is a marketing production consultant that specializes in the procurement and management of production house services.
We leverage a highly unique blend of procurement, production and marketing expertise to help our clients get the most of their production dollars.
We are different from your typical cost consultant.
We offer a non-traditional, common-sense approach to production house bid management that will deliver improved process efficiency, significant cost savings and a more empowered marketing team without ever jeopardizing the quality of your creative or the need to lock into a long-term contract.
Learn more about what we have to offer.