Optimising Production

OPTIMI$ING PRODUCTION EXPENDITURE AND CREATIVE ASSETS

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OGILVY & MATHER - WE SELL - OR ELSE

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Optimising Production Expenditure and Creative Assets

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For further information, or to discuss how Ogilvy can help optimise your budget and marketing plans, please contact: Toni Lee, North America ([email protected]) Paula Bernasconi, Latina ([email protected]) Serge Nicholls, Europe, Middle East/Africa ([email protected]) or Soames Hines, Asia Pacific ([email protected]) Other Ogilvy & Mather Booklets available: Optimising the marketing budget in recession Digital in a downturn: smart strategies for tough times How to get more effective advertising The new PR – leveraging digital influence to drive sales and reputation Turning shoppers into buyers Improving sales force performance

CONTENTS Introduction

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How to save up to 5% of your ad spend now without cutting your marketing plan

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Don’t cut — create efficiencies to reduce costs

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Ogilvy’s Redworks delivers it all

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The Benefits of Redworks are provided by...

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Here is how Redworks can find you 10 ways of saving money

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Published in 2008 by Ogilvy & Mather © Ogilvy & Mather 2008

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INTRODUCTION

“It is not the strong, nor the intelligent who survive, but those who are quickest to adapt.” Charles Darwin How to increase your profit when times are tough We face one of the most challenging business environments for years. Recessions caused by liquidity problems are particularly severe. In recent months we have seen major financial institutions and the world’s stock markets collapse. Your company needs to take urgent action to win through.

Who this booklet is for CEOs, CFOs and CMOs. Your marketing department must estimate the profitability of marketing spend. This booklet shows how to do it.

How to use this booklet Your company needs to estimate, even roughly, the consequences of cutting or maintaining or increasing marketing spend. Averages based on what other companies have done in recession are useful guides, but you do not manage an average business or an average brand. You need to know about your specific case.

Some companies do succeed in recession. They see it as an opportunity for growth. While competitors panic, they stick to a plan. This booklet is based on Ogilvy’s experience of winners in recession together with research into best practice. Optimising production expenditure and creative assets is only one of the issues that confront you. Ogilvy also offers practical advice on other potential pain/gain points in your company, including: – – – –

Optimising the marketing budget in recession How to get more effective advertising Digital in a downturn: smart strategies for tough times The new PR — leveraging digital influence to drive sales and reputation – Turning shoppers into buyers – Improving sales force performance

These booklets are available on www.ogilvyonrecession.com 2

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HOW TO SAVE UP TO 5% OF YOUR AD SPEND NOW WITHOUT CUTTING YOUR MARKETING PLAN In times of recession, the first reaction of a CEO or CFO is to look at ways to cut costs. Cuts in training programs and the introduction of a travel ban may buy time. A reduction in the workforce will probably provide the quickest result and the most logical way to save money. Actions such as these, however, can be viewed as politically sensitive and, in most cases, a last resort if there is to be any chance of maintaining continuity — let alone morale. Yes, an economic downturn is always an opportunity to clear out the dead wood. And most prudent companies review resource plans on an ongoing basis and include contingency plans to be implemented in times of economic downturn. Shareholder demands, however, have already forced companies to be leaner, meaning that there is little buffer left in the system. So when recession hits, it often means biting into the very talent you want to retain. This comes at a heavy price. If you are forced to let your best talent go, you have to be mindful that the saving of a monthly salary is only part of the cost. What about the years of training you have invested in ensuring the company’s future and the staff member’s loyalty? Once gone, the chances of them returning are extremely slim. So, whilst reducing a workforce may be an immediate and logical step in cost reduction, it may cost more in the long term.

The next, and probably easier, way to save money is through indirect cost. The marketing plan usually becomes the first target for cuts. Media expenditure, due to the large numbers involved, is a likely choice, but it has consistently been proved that a cut in this area provides a short term solution with long term ramifications. It is a fact that reduction in marketing spend makes no difference to a company’s profitability. There is also compelling evidence that companies who continue to spend through a recession recover faster than those who reduce their budgets. So, cutting media budgets may not be the answer. Another big number is agency production cost. How much of a marketing budget is media and communications production? This obviously depends on your marketing mix, what ever it is — it is not an insignificant number. Many companies do not know the answer to this question — since it has traditionally been handled locally and may be hidden within the advertising agency’s creative fees. So what are we talking about? Production covers anything involved in the final delivery of creative ideas to selected media. It includes TV commercials, press ads, strategic design, point of purchase material, print buying and all digital applications, including hosting creative assets and database management — in short, anything relating to the roll out of an initial creative idea.

“Unilever now spend about 10% of its $3 billion in ad budget on production on production.” Campaign 27 July 2007. Add to this the hidden costs managing the process as well as inefficiencies in creating assets across multiple markets and you will see there is a huge opportunity to reduce costs by making all this more efficient.

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For some years, companies have looked to make immediate savings on certain projects by handling negotiations direct with third party suppliers. It started with large print runs, but more recently companies’ procurement teams have been tasked in getting more involved with agency contracts and marketing expenditure. The assumption is that creative agencies are inefficient and, due to a lack of internal specialist technical expertise, are required to outsource parts or all to specialist organisations. Clients perceive this as a costly and unnecessary tier in the process. More often than not, the procurement solution has been to strip the agency of part of its production delivery role in favour of cheaper sourcing options. These have included the use of local bucket shops, multiple vendors or even proposing an in-house facility. Whilst, superficially, ‘decoupling’ options such as these may appear to make sense, more often than not it proves a false economy and could be ultimately damaging for a brand. Take the bucket shop approach. This option may provide a cheaper cost but jeopardises quality and consistency of the brand image. In a regional or global campaign, it cannot work. A global campaign can rarely stand on its own without the support of a local market. Most print ads and commercials rely on adaptation once they hit the local market. This could be as simple as translation but, more likely than not, involves ethnic talent casting and editing. In addition to the numerous costly iterations across different markets, liabilities remain where quality may suffer. A bucket shop does not have the network to provide consistent multimarket delivery. The use of multiple vendors also becomes a threat to consistency and offers little advantage in terms of the economies of scale achieved by concentrating work through one company. In addition, it requires a team of buyers; each a specialist in very different communication disciplines, to manage the process. They in turn will have to interface with a similar team in each end market to deal with all the local 6

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adaptations requirements, talent rights etc. Suddenly your organisation has incurred large additional costs through attempting to become a communications procurement specialist rather than concentrating on your key business competencies. Thirdly, there is the in-house option. Many times, clients (usually prompted by a procurement manager) have been heard to say, “I could set up my own organisation to handle all this work. It would give me more control whilst saving cost”. Yes, you could set it up and hire a team, but the likelihood is that the staff would not stay long. Good people involved in agency work need a creative environment. Only companies such as Apple, Microsoft and Nike and a few others born out of the innovation culture can provide this. Secondly, an in-house operation automatically saddles a client with fixed costs — easy to get into, but slow and costly to unwind. It takes time to downsize staff and, with a demotivated workforce, how will you ensure a seamless transition from in-house to outsource? Whilst all these options may show superficial cost savings up front, they mask hidden costs and difficulties for the long term. In addition, they are difficult to control and deflect focus away from the client’s core discipline. Remember, whilst deciding which is the best option for your company, the work still needs to be done.

This booklet shows you how to reduce costs by creating efficiencies in production and creative services and, in doing so, how to create a winning formula that will give your organisation an advantage over your competitors.

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DON’T CUT — CREATE EFFICIENCIES TO REDUCE COSTS For a company to survive a recessive period of the economic cycle, it is essential that they take stock and look at ways of streamlining processes and saving money whilst maintaining quality and consistency of their brand communications. Handling agency production in the right way can create up to 50 percent efficiencies whilst creating a competitive advantage. How? Consolidation of agency production can provide greater efficiencies, better quality and faster speed to market.

Here are 10 ways to achieve savings through greater efficiency The key to efficiency does not rest entirely on the ability of a client to outsource to lower cost suppliers from low cost locations. More, it relies heavily on good management, established work practices, specialist skills and a highly efficient production system supported by a proven technological platform. A good production company should be capable of providing ongoing project information in ‘real time’, including volume and resource reports by brand, by product or by individual staff member.

1. Consolidate all your production in one place “Putting all your eggs in one basket?” No, quite the opposite. This measure is putting your trust in one global network with the depth to ensure any potential risk is minimised. Global consistency is essential to brand equity. Only by consolidating all your agency production work under one roof will you be guaranteed consistent quality of execution of a creative idea across all media applications. You will also benefit from the efficiencies of getting work to market faster and savings achieved through economies of scale.

2. Save money by managing your creative assets How much control do you currently have over your creative assets? This is a big area and a mostly overlooked source of wastage. With every country developing its own version, there can be countless duplication. Design guidelines, TV commercials, digital imaging and artwork templates should be easily accessible to all markets and archived in one central asset bank with search engine access by brand, country or category. This reduces duplication, provides access rights and makes it easier to ensure adherence to brand guidelines.

3. Reduce workflow costs Faster output means quicker speed to market. An agency should be working to a clearly defined set of deliverables coupled with key performance indicators. With a sophisticated on-line production management system, projects can be pre-planned with progress visible to all. Built-in approval processes ensure accountability at every milestone. You need to be sure your production company has a system with built-in flexibility to be tailored to your company’s needs. 8

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4. Outsource to more cost effective markets If you decide to consolidate all your production under one roof, make sure your agency has the flexibility and depth to handle not only the large campaign work, but also local work as well. Does the agency already have an infrastructure with key hubs in low cost centres? Is the network wide enough, and is it used to operating across a number of key markets at one time on a 24 hour time zone? If not, you really could be putting ‘all your eggs in one basket’.

5. Hand over in-house production We have already highlighted the problems related to fixed cost and the difficulties and timing issues related to unwinding an in-house facility. If your company has an in-house production unit, you may consider handing over the management of this department to the agency. The operation can still continue to operate from the same premises — but adopt the agency’s management, systems and technology platform. This approach causes minimal disruption to on-going work whilst releasing your company from its fixed cost liability.

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6. Optimise buying power You have obviously considered your own purchasing power when it comes to buying marketing services. Have you ever considered how much that value can be enhanced when bundled into the consolidated buying power of one specialist sourcing unit? In the ’80s and early ’90s, clients moved the management of their media spend to specialist media shops in the knowledge their budgets could be optimised by more than 25 percent. The same rules apply to any client who consolidates production budgets into a specialist production unit. Large savings can be achieved through central buying of print with the capability of sourcing from low cost countries. All dealings with the agency and its suppliers should be totally transparent, with part of the KPIs including a bonus on savings achieved. From a corporate governance perspective and to ensure the integrity of your own staff, it is sometime better to make sure that these larger supplier negotiations take place at arms length.

7. Manage print more effectively Make sure you have a collateral strategy. Economies of scale usually dictate the larger the print run, the lower the unit price. The tendency for a print buyer is to estimate the highest quantity required, probably a year’s supply. Seems to make sense, but does it?

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Not necessarily. When the order is placed, little attention is paid to the fact that the contents and pricing may already be out of date within 3 months. A year’s commitment will buy brochures at a cheaper price, but an average of 20 percent will end up being thrown away at the end of the year. In addition, did anyone take account of the warehousing and distribution costs? A production agency should provide you with recommendations on the best way to handle your collateral material. A proper inventory system based on a series of smaller print runs can be as economical as a large one. It allows for brochures and print work to be regularly updated whilst cutting out the waste at the end of the year.

8. Effective use of digital AND print When we think of brochures, we usually think of printed paper without considering the intended end use. A lot of unnecessary money is spent on print production, postage and delivery of collateral material. But consider that most of the recipients have portal access and can check the contents of any brochure on the internet. An agency should be advising you on the effective use of both digital and print. Hard copy brochures will always be needed for certain brands and audiences. In most cases, however, they serve as a reference and are then thrown away. To this audience, a digital solution could have been just as effective. For some applications, a digital solution serves much better. Setting up data and response mechanics in the right way can result in digital copies being sent online to the right people and at a fraction of the cost of a printed brochure.

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9. Ensure fewer mistakes Reworks are expensive and can be a major source of wastage. Consolidation of assets and better production control systems can ensure more accuracy in the final output. Whilst the agency’s asset management system can store creative images, it also has the capability of uploading all the technical specifications for every one of your company’s creative outputs. This automated approach means accuracy in sizing for artwork, retention of statutory information and notices as well as colour matching for the differing individual media issues.

10. Do what you do, smarter Often, workflows and processes have evolved over time and consist of ad hoc solutions which individually may address certain matters, but collectively may be inefficient or obstructive. It may be time to assess which areas need changing or fine-tuning, and propose effective, viable solutions for enhancement of cost management, productivity and efficiency. Only an independent audit covering all aspects of your company’s internal and external production procurement processes can determine the right course of action for the future. The brief to the agency should provide for recommendations for a better way of operating whilst achieving savings without compromise to quality or speed to market.

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OGILVY’S REDWORKS DELIVERS IT ALL To deliver these efficiencies, we have built a ‘beautiful factory’ around the world. RedWorks is Ogilvy’s specialist online production management company. It provides an efficient high quality, but low cost solution for clients’ ‘Above Market’ implementation models. Established in 2005, the company has become one of Ogilvy’s fastest growing companies, working hand in hand across 3 continents. In Asia we have 12 offices working in 7 languages. We are involved in both global and regional production delivery programs for clients such as Kodak, Amex and IBM. RedWorks’ services include high quality, fast turnaround work for TV, Press, Retail POP and Digital advertising and communications. We provide adaptations for all media and design layout, finished art, and specialist services such as pre-press, colour management, retouching and DI. In addition, we offer colour proofing, Digital Asset Management, on-line project management and on-line approvals. We offer high-end design implementation services in the major centres across the world, as well as high quality, lower cost implementation services in off-shore hubs.

“RedWorks has also opened a new production hub in Dhaka,in a bid to improve outsourcing cost benefits.” Media 27 November 2008.

“In a global first, PC manufacturer Lenovo is moving its entire global advertising portfolio to WPP Group agency Ogilvy & Mather’s Bangalore branch. Account planning, servicing and creative — all will now be handled out of the Bangalore hub, which will work closely with other O&M branches all over the world to customise the advertising for different regions. The ‘Lenovo Hub’, as it’s called, has been on a test run over the past week or so and has been fully operational since Friday, June 1. The team in the hub will work on global print, television as well as Internet advertising for the Chinese PC maker, which could potentially go out to 160 countries where Lenovo has a presence. Though China might have been the logical destination to set up a hub for Lenovo, O&M’s experience with the IBM account in India swung the deal in favour of Bangalore. In the past, according to sources, O&M has been used for some work at the Asia-Pacific level by IBM”. The Economic Times: June 05, 2007 RedWorks creates efficiencies in production as well as reducing the time our clients have to invest in producing advertising and communications.

We are already operating client specific production hubs in Shenyang, Kuala Lumpur, Singapore and Bangalore.

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THE BENEFITS OF REDWORKS ARE PROVIDED BY...

HERE IS HOW REDWORKS CAN FIND YOU 10 WAYS OF SAVING MONEY

Simplicity

1. Can we save you money by consolidating all your agency production into RedWorks?

A single resource to create, adapt, deliver branded on-and-off-line communications.

Savings

Many of our clients certainly think so. We are currently handling major regional, global and local production assignments for: American Express, Unilever, DHL, Kodak, Motorola, Lenovo and Rehau.

Up-front and competitive pricing to control and monitor costs centrally, economies of scale and asset management.

Kodak – 13,000 projects, 31 markets, 26 languages

“Pricing for standard deliverables is 7 – 10% below the industry average.” Bird, Bonnet, Sauderman,Inc. — independent cost consultants findings based on competitive RFP and 22 year database of rates. Speed An efficient and nimble workflow process which guarantees fast and efficient turnaround times.

Strength A guaranteed, high quality product through collaboration between creative and production services. A highly skilled and motivated workforce focused on delivering a marketleading product.

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“The global network is now operating as efficiently as possible.” Pierre Schaeffer, CMO, Kodak CDG (the Consumer Digital Group) 2. Can we save you money by managing your creative assets? Yes. RedWorks is built on and supported by its own technological platform. It uses Xinet to provide online access to all creative assets, templates, finished art and images. We have the capability to post all material online, for whoever has access privileges. We can allow for layers of authority, giving different people access to different areas. We can post all finished artwork, working files, images and pdfs. This provides easy access for anyone wishing to refer to the library and place orders, or understand previous design solutions. Coupled with Xinet, we also handle extended property rights for image and talent usage.

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A global financial services client – 1500+ projects, delivered to 22 local markets, $2.1m in client savings

3. Can we reduce costs through workflow? Yes. RedWorks is an end-to-end solution, but can engage at all or any of the creative and production stages. Our internal processes and communications are designed to ensure maximum productivity, with a minimum of agency red-tape. We review the clients’ work and adapt our systems to mirror client requirements. The nature of our work requires flexibility and speed to enable quick communication. It is especially appropriate for adaptation work where the instructions are specific and a meeting isn’t essential. RedWorks is a specialist production organisation, a team of specialists performing closely interconnected/ interdependent tasks, tied together by: – Clearly defined roles and responsibilities – Clearly defined responses/actions – Clearly defined processes Our company is made up of client teams, not discipline teams. They are headed by Project Managers, unlike traditional creative companies led by a creative lead or Studio Manager. Our focus is on service, and this is the primary task of the Project Manager. Creative quality is a given. Using our on-line project management system, which can be seen anywhere online, annotations can be made and fed directly back to us. The full history of the project is retained, and reports detailing the project can be generated. This allows us to zoom in on problem areas and effectively smooth out bumps in the workflow. 18

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4. Can we outsource to more cost effective markets? In Asia we already have established hubs in Dhaka and Shenyang with a China hub currently under development. These are, in turn, part of a wider infrastructure of low cost centres within our global operation. In support of these hubs, we have offices in most countries to handle more complex or localised projects. Our RedWorks offices provide a one-stop-shop for centrally managed high quality work — at highly competitive rates. RedWorks works on a 24 hour time zone with the flexibility to allocate work where it is best suited, as well as absorb surges in work. Therefore, volume can be shared across the globe without any reductions in quality or increases in turnaround times.

5. Can we manage your in-house production unit? Yes, and this is an area in which we are heavily engaged during this recent recession. Clients now looking to unburden themselves as part of their emergency reconstruction plans have been amazed how much more competitive we are. Quite simply, better management, systems and an inventory and ratecard pricing for each output has, for one client, reduced the number of renditions by one third.

6. Can you benefit through our optimised buying power? We are currently one of the biggest buyers of marketing services in Asia. This covers print and TV editing, as well as digital. All transactions with third party suppliers are completely transparent. Financial exchanges on large projects are between client and third party suppliers and are handled direct based on RedWorks’ negotiations. We are in business to save YOU money. The more we save you, the more we are rewarded. 19

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7. Can we manage your print more effectively? We are already advising a number of clients on the ways they should manage their collaterals to reduce wastage whilst ensuring minimal stock. Our advice not only covers larger print runs, but also better ways to reduce regional costs by uploading local specifications so that outputs are automated in advance.

8. Can we advise on the most effective use of digital AND print? Yes. We think of output, not paper. We can advise clients on the best medium for their brochure. We can even set up the digital strategy to ensure the correct data and response mechanism for your brand.

9. How can we ensure fewer mistakes? There are inbuilt mechanisms within our operating procedures and online approval systems that automatically reduce the number of reworks. In addition, we expect to be judged and rewarded on our success through fixed KPIs. As such, mistakes and errors in production outputs are simply not in our interest.

Our audit team would cover:

a. Current internal processes: – Requests for material – Briefing documents – Cost management

b. External processes: – Agency management – Production management – Warehousing – Inventory management – Logistics – Customs and import taxes

10. Can we find smarter ways for you to do what you already do? Yes. RedWorks can assist in a full local or regional audit of agency, production and delivery specific processes. We can assess which areas need changing or fine-tuning, and propose effective, viable solutions for enhancement of cost management, productivity and efficiency. We will undertake a full production audit and give you a proposal as to how you could reduce costs without a compromise in quality.

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For further information contact: Toni Lee, North America ([email protected]) Paula Bernasconi, Latina ([email protected]) Serge Nicholls, Europe, Middle East/Africa ([email protected]) or Soames Hines, Asia Pacific ([email protected]) Alternatively, why take our word for it? We can also give you the names of clients to contact who will tell you how using RedWorks has benefited their business. 21

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