Magazine article Marketing

Press Costs Reveal Abuses

Magazine article Marketing

Press Costs Reveal Abuses

Article excerpt

Is it the great marketing rip-off? Meaningless estimates. Mysterious extras. Huge discrepancies in final costs. Agencies are resisting change. Clients should make a stand. Marketing exclusively presents the first in-depth investigation of UK press ad costs as ARM's John Orsmond argues for a move towards fixed cost pricing

Anyone still disputing client concerns over agency costs is on a losing wicket. Stage II of the ISBA/ARM Press Enquiry is complete. It proves beyond doubt that poor practice is widespread.

The client companies we surveyed represent nearly 10% of the total UK press spend of |pounds~3.8bn. That's a mighty |pounds~300m.

Our survey exposes serious costing inadequacies and short-lived use of press ads -- a disastrous combination for clients who badly need a better return on their marketing investment.

The first of its kind in the world, the press enquiry is a collaborative venture between the Incorporated Society of British Advertisers (ISBA) and the fixed-cost marketing communications company, Advertising Research Marketing (ARM).

Stage I of the enquiry, released late last year, (see Marketing, October 15 1992) revealed serious concern about agency costs. We identified poor procedural standards, especially in estimating and invoicing, and we found that clients are confused about technical complexities such as retouching and reprographics. Clients tell us that many of these problems stem from the unaccountability of variable-cost agency remuneration systems.

Stage II of the enquiry digs much deeper, looking at procedures and cost break-downs of the creative and production process.

The results do not make for happy reading.

Press ad costs, for example, vary wildly, with colour double-page spreads costing anything between |pounds~4000 and |pounds~80,000. Technical specifications of the examples differ, but nowhere near enough to account for a |pounds~76,000 discrepancy.

Worse still, agencies are producing many different ads for the same client, and placing them only a few times in many titles for short periods. So clients are spending over the odds for creative work which is then under-utilised.

Stage II of the press enquiry is an indictment of poor management and procedural standards in advertising. But it does at least suggest a way forward. It's up to clients now to take the initiative and make it their business to understand the specifications and related costs.

It won't be easy. Too many agencies are resisting change. But it's in their interests to close the gap between what clients expect and what they actually get for their money.

First, move away from variable-cost systems and replace them with methods which offer greater openness and reliability. Then, integrate media buying so that planning and placement are improved.

Regrettably, most agencies will shed old habits only when clients demand it. So the agenda for change must come from client companies. Doubtless the call for change will be resisted by some. But response to stage I suggests that forward-thinking clients and agencies are actively looking for positive improvements, showing a willingness to work together to find new costing solutions. Even for them the task will be sizeable.

Stage I highlights

101 large companies participated in stage I.

They are heavy users of press and they account for nearly 10% of the total UK press spend. They are concerned about and very dissatisfied with agency cost practices. The commission-based system is collapsing. Technical complexities and the variety of costing conventions are causing widespread confusion. Poor standards in estimating and costing are a predominant concern.

Press Inquiry Stage II

Of the companies from stage I, 87 participated in stage II. Stage II looks at:

* the kinds of supplier used and how they are paid;

* the kind of work clients buy;

* the costs associated with each stage of creating, producing and distributing actual examples;

* how those examples are being put to use. …

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