Preferential Treatment

Procter & Gamble’s recent move to create a list of preferred production company vendors has generated heated reaction from the production community, including strong opposition from the Association of Independent Commercial Producers. (AICP president Matt Miller has called preferred vendor lists “ill-conceived.”) But trying economic times are forcing advertisers to look at any number of options to reduce costs, and preferred vendor lists are getting a closer look despite the fact that such strategies have met with limited success in the past.

It’s natural that the laws of supply and demand relate to the advertising industry. Competition is an important component of the creative process and competitive bidding aids that process as much as the financial evaluation of a project. We have to accept the fact that advertisers will likely continue to be intrigued by preferred vendor scenarios.

Bottom line, changes in the way advertisers contract for production services are inevitable. The question is, how can all sides pursue change and accommodate new relationships in a manner that is fair, equitable and meets creative demands?

Whether or not preferred vendors are used, the industry must consider a change in “process,” both internally and externally. It’s the process that often causes cost overruns, and it’s the layers of approvals that increase vendor pricing. Advertisers need to develop well thought out, equitable production process guidelines that result in a more efficient, streamlined approval process. This should be monitored and enforced by individuals who know and understand both the nuances of the advertiser’s culture and all facets of the production process.

Advertisers should reject a one-plan-fits-all-jobs mentality for a customized approach where unique, individual savings can be found by going through the nuts and bolts of a project line item by line item.  Find out exactly where the money is being spent by defining clear expectations on deliverables and requiring more information and breakdowns.

In terms of managing expectations, have a keen understanding of the director’s treatment to avoid surprises down the road. And don’t allow inefficiencies to fester. Once you’ve set production process guidelines and articulated them, stick with them, or don’t bother writing them.

Finally, negotiate, but don’t get hung up on volume discounts. If you look at production and post in Toronto or other off-shore locations, you’ll find it can cost half of what it does in the U.S. — and that’s mostly due to a streamlined approval process, not because preferred production vendors are being used. Keep in mind that everything today is negotiable. Don’t rush to limit flexibility by only working with a select few.

If an advertiser does opt for the preferred production vendor route, they should consider the following guidelines:

Get the agency involved from the get-go. Before drawing up a list, get agency input. The agencies, after all, have to work with the preferred suppliers and make sure they deliver.

Clearly define the preferred vendor deal. Detail the scope and appropriateness of the preferred vendor deal while ensuring that creative resources are properly aligned with creative needs. For example, you need to be sure the preferred vendors have the skill-sets to support the creative needs, and you need to develop a plan for how to deal with creative needs not met by the vendor list.

Determine parameters for success. An advertiser must make sure they’re getting more value than they were before. For example, you may negotiate a preferred vendor deal with a production company, agree to pay them on time and, in return, get reduced fees and more ways to use your content for your investment.

Identify the “right” suppliers. Find suppliers who can sustain their business without a vendor deal; you don’t want to choose a supplier whose eggs are all in one basket — yours.