ANA Insight Briefs

Production DecouplingAn Emerging Industry Trend

Overview
Whats Inside? An overview of production decoupling The mechanics of production decoupling A look at how the UK is using production decoupling The results of the WFAs Production Decoupling Survey Using a production agency ANA Member Case Studies: Hewlett Packard and Mattel Sources Related resources Production decoupling is the separation of the business of production from creative development. In the broadest sense, it can be defined as activities further down the supply chain, traditionally controlled and managed by agencies, which are moved and may be controlled and sometimes even managed directly by the client or by a third party designated by the client. Decoupling is a firm reality outside the U.S., as many advertisers are looking for more control and cost efficiencies in the production process and technology has enabled that. There is much work being done in Europe on this topic, particularly in the U.K., led by the Incorporated Society of British Advertisers (ISBA) and the World Federation of Advertisers (WFA).

How Production Decoupling Works

1. Discovery 8. Review, adjust, enhance 2. Define spend and workflows

7. Implement

Decoupling Process
3. Propose optimum process 4. Identify associated savings

Plan & agree implementation strategy

6.

5. Agree with all stakeholders

The Decoupling Process: Identify and agree on a strategic procurement process. Ensure that all stakeholders are invested in the process.

Production Decoupling

Create clear, demonstrable, and measurable objectives. Bring the agencies with you! Make the agency a partner in reengineering the buying process. Start with the simpler things. A phased approach builds and delivers credibility, provides momentum, and establishes an environment for success. Define the appropriate approach with subcontractors and suppliers. Contact production companieseither directly or via their agencies.

The UK is Leading the Way

Decoupling is not new to the UK market. It has been a red hot practice there for the last ten years because money saved through decoupling can be re-invested in the company and have a big impact on the bottom line. The decoupling trend is being primarily driven by a demand for greater control of the marketing expenditure and developments in new technologies. In the UK, the top five areas for decoupling are production, post-production, insurance, pre-production, and translation. According to a survey that was sent to WFA and ISBA members, print was the biggest media for decoupling, followed by TV, Outdoor, and Point of Sale. Even the BBC no longer allows their agencies to manage production. Instead, they use agencies for ideas and then do the production themselves. The benefits of decoupling include greater cost transparency, better control of agency costs, closer alignment with marketing, better control of agency commissions, better quality in all deliveries, and a closer alignment with finance. Overcoming the perception that it will reduce quality, agency reluctances, and identifying accurate costs are all challenges that face the decoupling process. For decoupling to succeed, a company needs to have marketing and procurement working together. Its also important to make sure that all stakeholders are on board and that your objectives are clear. Dont impose, but involve your agencya phased approach helps drive momentum and credibility. Also, dont forget about quality control. Success in decoupling can be demonstrated through a positive impact on creative quality or efficiency, an increase in value from production budgets, working with market leading subcontractors/suppliers, agency involvement, and having a consistent solution to production issues. Decoupling is the right solution for many because it puts business needs first, is talent and technology based, and rewards performance. It also greatly simplifies the production process.

Approach decoupling by: 1. Identifying and prioritizing the production elements you wish to decoupleevery brand is different. 2. Defining the appropriate procurement approach with sub-contractors and suppliers. 3. Deciding whether to contract directly or via agency partners/3rd party management company.

Production Decoupling

Survey Says
The WFA conducted a decoupling survey in April of 2008 among its members, in which respondents were asked, What areas of activity have you decoupled? The survey demonstrated that there is a clear trend towards focusing decoupling efforts on all elements of production. In the chart below, red shading indicates not just the top five most frequently decoupled activities, but are also those areas which have generated the biggest level of savings.

What areas of activity have you decoupled?

Survey respondents indicated that savings from decoupling come from many sub-areas: Production and post-production are the areas in which most members have decoupled, but as can be seen in the next chart below, bigger savings were generated elsewhere in less commonly targeted areas such as studio/film location. Responses show music and translation get comparatively higher levels of average savings than the rest, suggesting these less creatively sensitive areas are potentially fruitful areas to target. Most clients (three-quarters) do not have incentives in place for either the agency or the production house if they succeed to reduce overall costs.

What savings have you made?

% savings vs. previous year

Production Decoupling

Respondents were also asked to rate how their agencies have responded to this new trend.

How have the agencies reacted?

How to get agency buy-in: 1. Engage in frank discussions with senior agency management. 2. Stress that the agency can now deliver excellent creative knowing that the back-office is in good hands. 3. Ensure that they are compensated fairly for the work they are doing. 4. Engage the agency production department in the process. 5. Start decoupling with existing agencies before forming new partnerships.

Production Decoupling

Using a Production Agency

Production agencies work with the creative and media agencies. Their responsibilities include: Adaptation: Versioning of a master piece of creative. Fulfillment: Receiving creative ads from the creative agency, receipt of media plans from the media agency, and then matching them up. Production process management: Delivering efficiencies between the master creative and the media schedule. Asset management. Brand compliance. Tracking, reporting, and technological utilization.

Production agencies do not do creative work or strategy. Creative masters are produced by the creative agency, approved by the client, and then supplied to the production agency.

After that, its a three-step process: 1. Produce adaptations and versions. This includes changing tags on ads (e.g., local dealer tags) as well as translation/trans-creation (i.e. making narrative adjustments to film or press ads to respect cultural sensitivities.)

2. Gain agency/client approval. This is largely done online. Agency approval is rarely required because at this stage interaction is most often directly with the client.

3. Supply to media owners worldwide. Most of this is done digitally. All press/print is digital. With television, there is less done digitally as there is still the need to physically ship tapes.

Production Decoupling

Decoupling in Action: ANA Member Case Studies

Hewlett Packard
HP has separate decoupling initiatives for their various regions in North America, EMEA (Europe, Middle East, and Africa), Asia, and Latin America. Their decoupling strategic process consisted of: Conducting a complete landscape assessment, including interviews of agencies, production houses, peers (some of that facilitated via ANA introductions), and internal marketing managers. Considering the supply chain to prioritize efforts and identifying the media types that had the largest production spend. Obtaining high level management buy-in (this was critical as it facilitated deeper dialogue with the agencies). Identifying the opportunities, including the biggest gaps or areas of concern for marketing managers. Partnering with agencies and marketing managers. Implementing sourcing and solutions. Continual management of change, internally and externally.

Tactic used included: Supply chain visibility and improvements begun via a collection of current rate cards and production estimates. Moved agencies towards using digital workflow and asset management tools. Developed rate cards for production, identifying those attributes that are distinctly separate from the creative process getting the vocabulary straight on rate cards was a challenge. Management of change focus areas included all communications to the production houses were from HP on behalf of HP and their ad agencies and the creation of an internal cross business group team that meets quarterly to share progress, next steps, and obtain ideas.

Mattel
The Mattel Worldwide Creative & Marketing Communications Group is a creative services group that drives Mattel brands and corporate marketing initiatives through creative expertise and intimate brand knowledge. This in-house group was set-up in 2005 and is organized as follows: Account Management, Brand Design, Brand Merchandising, Broadcast Production, Design Services, and Photography. Broadcast production specializes in the creative development and production of TV commercials and videos. The majority of commercial production occurs on-site (Mattel has a sound stage on their premises in El Segundo) with some location shoots added in. There are five staffers in the Mattel in-house group (Fire Drill Productions) and all are producers. There are no on staff creatives; rather, freelancers are used. More than 150 commercials are produced per year. In conjunction with Fire Drill Productions, Mattel has decoupled production under the following scope-of-work scenarios: 1. Seasonal products. 2. Creative for products rather than brands. 3. Pick-up shots. They have enjoyed substantial savings in creative leadership fees and production as a result of this decision to decouple some of their production. The investment/cost to Mattel for this move was low and it was used for brands that required creative support, but didnt have the sales volume yet to support an external agency managed shoot or in situations where the agencys timing did not work with Mattels schedule.

Production Decoupling

Sources

These proprietary resources are available on the MIC Online at www.ana.net/mic

Decoupling: The WFA Perspective. Steve Lightfoot, Communications Procurement Manager, World Federation of Advertisers. ANA West Coast Chapter Marketing Financial Management & Procurement Committee Meeting, 07/29/08. HP Case StudyProduction Decoupling. Renee Reeves, Global Marketing Procurement Manager, HP. ANA West Coast Chapter Marketing Financial Management & Procurement Committee Meeting, 04/08/08. Mattels Perspective on Production Decoupling. Lisa McKnight, VP, Creative & Marketing Communications, Mattel Brands. ANA West Coast Chapter Marketing Financial Management & Procurement Committee Meeting, 07/29/08. Production DecouplingAn Emerging Industry Trend. Steve Lightfoot, World Federation of Advertisers; Richard Woodford, Merck; Pat Murphy, MurphyCobb Associates; Jeff Cobb, MurphyCobb Associates. ANA Production Management Committee Meeting, 12/06/07. Production DecouplingAn Emerging Industry Trend. Facilitators: Steve Lightfoot, Communications Procurement Manager, World Federation of Advertisers; Deborah Morrison, Director, Consultancy and Best Practices, Incorporated Society of British Advertisers. Panelists: Jeff Cobb, Principal, MurphyCobb & Associates; Julian Hooks, Worldwide Marketing Procurement Category Leader, Johnson & Johnson, Europe; Mark D. Hudson, Procurement Manager, Marketing Services, BP P.L.C. ANA Advertising Financial Management Conference, 05/05/08. Production DecouplingPerspective from a Global Production Agency. Simon Toaldo, CEO, hub+. ANA West Coast Marketing Financial Management & Procurement Committee Meeting, 10/07/08.

Related Resources
Need to keep up to date on the topic of production decoupling? Visit the ANA Marketing Insights Center www.ana.net/decoupling. Interested in learning more about production decoupling? Consider joining ANAs Advertising Financial Management and Production Management committees to stay up to date on this hot topic www.ana.net/committees.

About the ANA

The Association of National Advertisers leads the marketing community by providing its members with insights, collaboration, and advocacy. ANAs membership includes 400 companies with 9,000 brands that collectively spend over $250 billion in marketing communications and advertising. The ANA strives to communicate marketing best practices, lead industry initiatives, influence industry practices, manage industry affairs and advance, promote and protect all advertisers and marketers. For more information, visit www.ana.net.

Compiled by Susan Burke, Knowledge and Research Specialist, ANA Copyright 2009 by the Association of National Advertisers, Inc. All rights reserved.

Production Decoupling