TRANSPARENCY CUTS COSTS!

Sharing details about costs leads to better results – Dr. Muneer Muhamed

How often have you asked this question: ‘How much does it cost to produce a brochure, build a large digital display or design an emailer?’ Inquiries work well when establishing an affordable budget for a campaign or new project.

If you know that a company’s annual marketing budget is Rs. 6 million, you probably wouldn’t recommend that it spend half of it on one project unless there are extenuating circumstances such as establishing credibility against a much larger, entrenched competitor.

The big challenge with marketing today is that many of us do not feel comfortable about asking the right questions regarding the value of marketing communication outputs. For instance, if I were to spread a variety of brochures on the table and ask you to estimate the price tag for each, I doubt that you would be able to even come close to the correct amount.

And that is a major problem for both the communication or advertising agency doing the work and the executive in charge of approving the budget. In the past, CEOs rubbished this under the carpet but today, it doesn’t work that way.

For too many years, people have treated this information as if it was some kind of national security matter, and the result is widespread ignorance on both sides of the budget recommending and approving fence.

Even experienced practitioners are reluctant to provide this information. It is hard enough to demonstrate ‘value’ to a single budget approver who may be questioning expenditures based on misinformation or incomplete data.

When the number of people exposed to these numbers begins to grow, the misinformation can spread and the potential for disaster could be on the rise. At least you can see how advertising people become paranoid about these things.

But even though there is a downside to sharing costing or pricing information, it could be said the real problem is that we don’t share enough. If marketing and sales managers had the same familiar feel for appropriate project budgets, we’d all be a lot better off.

The predictability of marketing project costs can be demonstrated if you understand the variables. For example, printing costs are not highly variable. You can ask five printers to bid for a particular job and the estimates will be remarkably the same (assuming they all use similar equipment and paper).

Photography costs do not exhibit much variance either. The day rates of established photographers are easily obtained and they will estimate their costs based on the number of days you specify. If the project requires more, the cost goes up.

Meanwhile, illustration costs are more of a black box – but I have discovered that if you have a photography budget and decide to use illustrations instead, it is notable how many illustrators will be happy with that.

The main cost variables involving creative services are copywriting, layout and design. Inexperienced copywriters may ask a low rate per assignment instead of per hour while experienced copywriters can command hourly rates, which could be pretty high.

You may assume that the more experienced copywriters are going to be a little faster but the main thing you are looking for is copy that quickly gets to the critical issues and explains them in easy to understand terms.

And of course, you are looking for copy that produces the desired results.

Even if an inexperienced copywriter wants less to write an ad, you’re probably going to get better value by selecting a more experienced person. The same holds true for art directors. Their hourly rates may start high but the difference in creative skills often makes the higher hourly rate people of better value.

But let’s assume that you have picked an agency or creative firm with experienced people and a good track record. How do you know whether you’re paying a fair price or being taken advantage of?

You would like to be sure that the budgets you allocate are reasonable for the tasks at hand and the best way to do this is to develop some measurement scales.

Share information with your peers and ask them what they would expect to pay for an eight page brochure, a half page colour ad or a 30 second TV commercial.

The best way we can know whether the amounts we’re spending on various projects are reasonable is to pool our knowledge of costs. You see lots of great work. Wouldn’t it be nice to know what people paid for them?

Not only will you gain the confidence to set reasonable budgets for quality work that is more likely to have an impact on your company’s business but you will also be able to fend off the bean counters when they come looking for budget cuts.

The bottom line is that as a marketing communication specialist, your budgets should be sufficient for the type of work you want done – and you should be able to derive the maximum value for it.