Do You Know The Value

Do you have any idea how much it costs to design and print a brochure, commission a large billboard or design an event logo? If you say nay, welcome to the real world of marketing folks! And herein lies the problem for establishing an affordable budget for a marcom project.

If you know that a company’s total annual marketing budget is Rs 2 crore, you probably will not recommend to them to spend half of that on one project alone, unless there were extenuating circumstances – such as establishing credibility against a much larger, entrenched competitor.

The real challenge with marketing is that most executives are not comfortable to ask the right questions regarding the value of marketing communication output. For instance, when I put out a variety of brochures on the table and ask an executive to estimate the price tag for each, I can almost certainly tell you he or she will ever come close to the actual cost – and that’s a huge problem for both the agency doing the work and the executive in charge of approving the budget. Many of you have witnessed this problem cropping up every now and then in meetings with senior executives.

For a long time now, people have treated this information as if it were some kind of national security matter, and the result is widespread ignorance on both sides of the budget recommending/approving fence. Even experienced practitioners are reluctant to give out 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 starts to grow, the misinformation can spread, and the potential for disaster always is there. Probably now you can see how advertising people become paranoid on these things. Even though there is definitely a downside to sharing pricing information, I think the real problem is we do not share enough. If marketing and sales managers had the same familiar feel for appropriate project budgets, we would 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 similar (assuming they all use similar equipment). Photography costs do not exhibit much variance either. Day rates of established photographers are easily obtained, and they will estimate their costs based on the number of days required. If the project requires more, their cost goes up. 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 remarkable how many illustrators can be happy with that.

The main cost variables involving creative services are copywriting, and layout and design. Inexperienced copywriters may ask a small rate per assignment instead of per hour, while experienced copywriters can command hourly rates, which could be pretty high. You assume 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 are probably going to get better value by selecting a more experienced person.

The same holds true for art directors. Their hourly rates start high but the difference in creative skills often makes the higher hourly rate people better to deliver the desired value. But let us assume you have picked an agency or creative firm with experienced people and a good track record. How do you know whether you are paying a fair price or being taken advantage of? You would like to be assured of 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. Ask them what they would expect to pay for a 6-page brochure, a half-page colour ad or a 30-sec TVC.

The best way we can know with any certainty about what we are spending on various projects is reasonable is to pool our knowledge of costs. You see lots of gorgeous work. Wouldn’t it be nice to know what people paid for it? Not only will you gain the confidence to set reasonable budgets for quality work that’s more likely to have an impact on your company’s business, but also you will be able to fend off the ‘bean counters’ when they come looking for budget cuts.

The bottomline: As a marketing communication specialist, you should get enough budgets for doing the right work and you should derive maximum value for the same.

(The author spearheads execution and innovation for clients @CustomerLab)