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Risk Sharing with an Ad Agency?

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Brian Tetamore
Risk Sharing with an Ad Agency?
on Jan 16, 2010 at 2:21:54 am

I wonder if anyone has some suggestions for the following situation. Our company is talking with an ad agency about developing campaign templates. By that I mean, the ad agency has potential clients coming to them because they saw one of their campaigns and now would like to "buy" or use that same campaign for their fund raiser. So, the ad agency is now looking at producing their campaigns so that they can be re-purposed for other clients.

The question as a video production company is how can we partner with them so that both the ad agency and our company benefit? Do we just charge them normal production rates? Do we offer a discount program where with each subsequent project we'll offer more of a discount? Maybe there is a risk-sharing agreement where we take a percentage of the campaign in return for offering discounted production services?

Any ideas?

The Visual Rabbi
TheVisualChurch.com
"Crafting Visual Messages to Engage and Persuade"


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cowcowcowcowcow
grinner hester
Re: Risk Sharing with an Ad Agency?
on Jan 16, 2010 at 4:47:07 pm

When I started out, I totally offered discounts for quantity. I felt I owed them a thank you of sorts. Over time, I learned their thank you is my product and that's what they come to me for. By that, I was only robbing myself (and my family). Today, normal rates apply all the time. I don't overbill when a client has fat pckets and I don't do half price gigs because they can't afford me. We are either a match for what we provide or we aint.
Pitch away. Make em want ya. Charge your normal rates. Don't forget how much they will mark it up. Let em. This is their win in the deal.



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Richard Herd
Re: Risk Sharing with an Ad Agency?
on Jan 16, 2010 at 5:36:15 pm

Charge Normal Rates. I can't stress this enough. (While I'm no longer in business as a one-man show, because I was hired out of the boutique thing and into a big corporation), I still have to rely on some media being created by some other people. And the contract my corporate lawyers force my vendors to sign is a bit exploitive in my opinion. Believe it or not, you might even be in a position to negotiate something like a service agreement. For $X * Y% I will drop everything I'm doing so you receive first treatment, on a moment's notice. In big huge corporate structures, like those between an ad agency and client, ideas get kicked around for several weeks before anyone finally says go. When they say go, they expect it finished on a rushed time schedule. Of course, you're willing to meet their demands, but since you have other clients, you need mo' money to put them on the back burner. Again: my vendors do this for me. We pay a premium for faster service than what normal rates imply.


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Gary Hazen
Re: Risk Sharing with an Ad Agency?
on Jan 16, 2010 at 5:58:44 pm

"Maybe there is a risk-sharing agreement where we take a percentage of the campaign in return for offering discounted production services? " -B.T.

That sounds like a kick back to me. I agree with Grinner, it costs what it it costs. VO talent, actors, music; all fixed costs - you're going to have pay for the licensing for each subsequent use. If you've designed a motion graphic treatment then sure you could easily repurpose the treatment for a different customer. But are those savings on the front end significant enough to justify any discounts on future versions of the work? Ad agencies are the rain that feeds the production community. But you give them an inch and they will take a mile. In end the discounts that seemed like a good idea on paper will result in thin profit margins. If you attempt to adjust your rates with the agency they will take their "discounts" idea to the next production company down the road.


"The question as a video production company is how can we partner with them so that both the ad agency and our company benefit? Do we just charge them normal production rates?" -B.T.

Charge your normal rate and both parties will benefit. They benefit from getting high quality work turned around on time and on on budget. You benefit by getting paid a rate that is fair for the quality of work that your company produces


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Chris Blair
Re: Risk Sharing with an Ad Agency?
on Jan 16, 2010 at 7:14:01 pm

We've actually experienced a similar situation...and gotten screwed. In our scenario, an ad agency came to us to create a graphics package for a television campaign for one of their clients. The client previously had low-end "yell and sell" spots. The promise was that if we did the job for X amount of money, we'd get all the future production, which was substantial...typically at least every two weeks.

We agreed. We shot video for a couple of days, did a couple days of graphic layouts and a couple more of compositing and design, then edited the first series of spots.

The campaign was well-received. The client loved the higher-end look and everyone was seemingly happy. The ad agency assured us more business since everybody was happy.

Months go by and no more calls....but we DO notice NEW spots on the air for the client. LOTS of them. These had NEW graphics and animations that look exactly like our design. This ad agency also had an agreement when you shot video that they owned the tapes and footage. No big deal...lots of people do that. But we also see our nicely lit and shot footage used in these new spots. Much of it footage previously not used in the initial campaign but shot for future use.

The ad agency came to us to get the nice design promising future work...then once they got the templates designed and the video nicely shot, they took it all to the local cable company and asked them to "copy" the look and continue the campaign at, you guessed it, probably half what we charge. They even submitted the campaign in the local Addy awards and listed the cable company as the production company! You guessed it. It won in it's category.

So my advice is beware. Ad agencies are not high on my list of reputable companies. Many of them will do literally anything to put 100 more dollars into their pockets on a project. If it means abandoning a production company, so be it. They'll do it. So charge full rates and then some. If there are rush gigs, charge time and a half. Require them to give you a certain amount of notice for booking or a certain amount of time to complete a new template. Don't assume just because you've done the work in the past, they'll come to you for it in the future.

Chris Blair
Magnetic Image, Inc.
Evansville, IN
http://www.videomi.com


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Tim Kolb
Re: Risk Sharing with an Ad Agency?
on Jan 16, 2010 at 8:46:06 pm

Yes, this is bad mojo.

There is no such thing as "risk sharing" when you have no client contact or connection to the actual customer.

You're creating pre-vis materials for the ad agency to use to sell their services to their client... If you wanted to produce the material and give it to all the ad agencies in your market to use, I suppose you could do that, but the chances of spec work done for an ad agency converting to a payoff is always slim, even on the biggest jobs.

Proceed with caution and under NO circumstances do you commit these materials to this agency exclusively. Give them a three or six month exclusive and see what they do with it...and reserve the right to take the templates elsewhere. Keep ownership of the production work product.

It's not that ad agencies are evil BTW, I work with several that are just fine. Ad agencies have to reel in the work for their own good and if the client happens to hate what you've done, they have to agree with the client and ask how they'd like it done...or they don't get the job.

If you want to help an ad agency, offer to be in the client meeting to handle any technical questions, etc. Once the client has seen you face to face, it's easier for you to see what the client really wants and understand if you can do what they want or not-on the spot. I only have one agency that's ever asked me into one of these meetings, and I think I've been an asset for them (or I've certainly tried anyway).

Be careful how much spec work you do when it has to pass from your hands to be presented by someone else...you're one layer removed and it's very hard to know what is really going on in those situations.



TimK,
Director, Consultant
Kolb Productions,


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Nick Griffin
Re: Risk Sharing with an Ad Agency?
on Jan 16, 2010 at 8:52:49 pm

First, I think Brian could have a co-producer arrangement with the agency provided it came with a solid contract that, among other things, stipulated that he owned aspects of the production and the concepts.

But... the only way this would make sense would be if there were a SUBSTANTIAL upside potential and not just the chance to get a little more work. It's all risk/reward ratios guys. If you want me to take a risk or accept a lower rate then there must be a pretty BIG and fairly likely payoff in the future. Otherwise it's just another way of getting "ground," (ie.- what a Grinder does).


[Chris Blair] "They even submitted the campaign in the local Addy awards and listed the cable company as the production company! You guessed it. It won in it's category."

Chris -
I thoroughly dislike litigation. It can be an enormous waste of time and especially of mental and emotional energy. However in your case I would have sued or found some other way to let your entire ad community know that this agency is sleaze and that the Addy was won falsely. Also going forward I assume that you no longer give out scenes that weren't used in the finished production. To state the obvious, it's just an invitation to get screwed.



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Chris Blair
Re: Risk Sharing with an Ad Agency?
on Jan 18, 2010 at 2:51:00 am

Nick Griffin: I would have sued or found some other way to let your entire ad community know that this agency is sleaze and that the Addy was won falsely. Also going forward I assume that you no longer give out scenes that weren't used in the finished production. To state the obvious, it's just an invitation to get screwed.

Nick,

It wasn't worth suing over...especially in a fairly tight-knit advertising community...and don't worry, everyone in the advertising community knows this agency is sleazy without us telling them.

As for not giving out scenes used in a finished production... sometimes agencies ask for the footage up-front as part of a contract to do the work. It's pretty difficult to refuse if you want the work. I'm a big proponent of retaining copyright ownership of raw footage, but there are times when taking a potentially lucrative gig supercedes that. In this case, we took a gamble and got screwed. We don't do any work with that agency anymore and people in the advertising and production community are well aware of what kind of company they run.

Sad thing is, many clients are not...and they continue to get screwed by this agency's slick pitches. Once the client is corralled, they get virtually nothing from the agency that was promised, and leave as soon as the contract is up.

We believe they'll get what's coming to them....only problem is, they've been doing business this way for almost 20 years! I guess justice is sometimes slow in coming!

Chris Blair
Magnetic Image, Inc.
Evansville, IN
http://www.videomi.com


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