Thank You AdAge!

Today an article was posted in AdAge about new agency pricing models changing the game for the industry and for clients, alike. This is something we here at iAdvertizing.com have known since our inception. We're thankful that others are realizing the benefit of "transparency" also. Please read the article below from Today's AdAge.com
Best Always,
Dave J.

Nontraditional Firms Can Lead Way to Better Pricing Structures
We Have a Pendulum Swing When What We Need Is a Paradigm Shift
by Bill Boris-Schacter
Published: July 08, 2010

The value-based pricing debate is just the latest chapter in the history of client-agency haggling over compensation.

Everyone is frustrated. But arguably, different kinds of agencies have different reasons for frustration. Nontraditional agencies (like the one I work for), which never engaged in the pricing methodology that led to today's value-based pricing, are suffering alongside our traditional brethren paying the price for bad pricing.

I'm not here to complain about unfairness but rather to suggest that nontraditional agencies have a pricing approach that offers a better solution.

First, some history. Today's value-based pricing represents the full arc of the pendulum swing from decades ago when agency fees were simply a mark-up on media spend -- an elegant, yet incredibly self-serving approach, because agencies were motivated to spend more for their clients, whether or not it was the right strategy. The important point is that price had nothing to do with the cost to the agency to manage the campaign.

Sound familiar? That's basically the situation we're in with value-based pricing, only now it's the clients establishing the price with little regard for the cost to agencies. With value-based pricing, cost is explicitly excluded from the discussion. Clients openly don't care what the cost to the agency is; they decide, based on historical data, what they're willing to pay, with a potential for upside only if key success measures are met. The eventual upside may merely cover overhead, if that, and may never lead to profit for the agency. Is anyone surprised that less than 1% of agencies are willing to accept value-based pricing?

Once agencies were guilty of pricing with seemingly arbitrary connection to costs; now it's clients. Quite the pendulum swing.

I believe what is needed is a paradigm shift, not this pendulum swing. The paradigm shift can be modeled by those of us at nontraditional agencies (in my case, a brand-experience agency), which have never charged based on media. We have historically been more project-based than our advertising brethren. We make tangible creative products -- brand experiences you can feel and touch, live events, things that have real, hard costs and require extraordinary expertise and talent. We used to regard this as a weakness -- it meant we were "tactical" -- but in pricing, it's actually a strength.

Because we have had to present our pricing to our clients on a much more regular basis, we have had to explain and defend our pricing over and over again. We've perfected a simple approach to pricing our services that works with any client, be they marketers or procurement personnel. It can be summed up in one word: "transparency."

Transparency in pricing shows the buyer, in clear and straightforward terms, exactly what it costs us to deliver what we promised, and exactly where we are making money. We detail how our fees are calculated based on roles, hours and rates. We specify by line-item what we anticipate our third party costs to be (which for a live brand experience may be as much as 80% of the total price). We specify what costs are fixed and what costs may vary (and we limit those variable costs). We walk our clients through all of this and then discuss opportunities for potential savings or potential rewards through the attainment of mutually agreed-upon performance goals.

Ultimately, we set a foundation for an open conversation where cost and price are inextricably linked. Both sides are clear about where we make money and where we are spending money, and both sides are confident that we're doing so in a way that's responsible.

Transparency leads to understanding. Understanding leads to trust. Trust speeds agreement. And transparency has the added benefit of compliance with all the mandates required under the Sarbanes-Oxley Act.

Just as clients have looked to nontraditional agencies for new approaches to their marketing, they can look to us for new approaches to their pricing. And then, hopefully, we can all stop paying the price for bad pricing.

ABOUT THE AUTHOR
Bill Boris-Schacter is exec VP of operations and client finance at global brand experience agency Jack Morton Worldwide.

My Type of Politician

By nature I'm not a political being (I'm in advertising) but it occurred to me just the other day that our politicians could use a little creative thinking (like our designers provide us) when it comes to their jobs and the performance of their required duties. Hypothetically speaking, if I ran for office, I'd use a lot more common sense than I'm seeing exhibited by our current gang of elected officials. Now, before I tell you what I'd do to correct the situation let's begin with some basic assumptions:

1. That our elected officials are there to represent US as citizens. That's their job description, period.

2. That our elected officials are citizens of the United States, just like those they are chosen to represent (again, US common folk).

Now, as I told my wife the other day if I ran for elected office in Washington I'd go for one term and do two things. The first thing that I'd do is run on a platform of COMPLETE REPRESENTATION. Meaning that my political views would be, should be, and are otherwise irrelevant. What I think or believe would not matter in the least. My understanding of representative government is that I'm NOT being put in place to further my own personal or ideological agenda, and therefore, what I believe should NOT count. Instead of staffers manning phones and taking down messages that our current representatives never see and/or pay attention to, I'd set up a website that would contain the following:

a. Every bill on which I would be voting

b. The official language of that bill

c. Lay person language/interpretation of that bill (for those non-lawyers out there)

d. What that bill means to the people I represent (both upside and down)

e. A set of buttons: vote - [] yes [] no

With this straight forward (and very easy to implement) approach every voter's voice could and would be heard. We have the technology to do this now, unlike even a mere decade ago. Oh, and for those of you saying "what about those without computers?" Guess what, Internet Cafe's, Public Libraries,etc... all have computers with Internet access for the public. Access is not an issue. And as a representative I would then cast my official vote "yes" or "no" based off of the direct response from the people in my district. No middle man so to speak...just the unbridled will of the people being conveyed directly and unfiltered to their chosen representative. And yet another benefit...there's a record so I could be held accountable. Did the number of yes or no votes from the website log correspond with my voting record? Holy cow...you mean my constituents could hold me "ACCOUNTABLE?" Say it ain't so! (Oh and by the way, there would be another staffer or two to verify the addresses of the people responding so no "stuffing the ballot box" so to speak). Politicians who employed this would NEVER have to defend their decisions on voting. It would be a simple matter of votes, one way or the other...very binary!

Secondly...I would go to Washington to officially bring to the membership a motion for the 28th Amendment of the Constitution. This amendment would read something like this:

The Congressional and Executive Branches of the United States government shall pass no law, binding upon the citizenry of the United States, that shall not be equally binding to all members and staff of Congressional, Executive, and Judicial branches of the United States government.

It would pass folks...I'd love to see the politician face his or her district voters and try to explain WHY they did not vote for a Constitutional Amendment that made them equal to us. It simply would not happen.

Now I've mentioned these two items to several dozen people over the past few weeks...both Democrat and Republican alike, and not one of them said "that's a bad idea Dave...as a matter of fact most of them said, "Run Dave...I'd vote for you on those platforms." Now if someone as mentally challenged as I am can come up with a solid idea for both absolute representation and equality between government and citizens why aren't others? Have you heard one politician espouse either of these ideas...if so, please let me know. I want to support him or her.

Best Always,
Dave J.

AMAZING ARTICLE

I had the following article sent to me by a friend who is also in the advertising business. He looked it over and with what's being reported came to the same conclusion as me...that if indeed we will be able to see the various "real time" importance and/or relevance of one social topic compared to another we and our clients can adjust strategies "on the fly" with greater accuracy and results.

Enjoy
Best Always,
Dave J.

Watching the Internet Think
By John Brandon
- FOXNews.com



The Web is an organism, and science can graph it. Through mesmerizing, flowing images and pulsing charts, new Web sites show who’s talking about which topics and how the Internet is connected -- even which colors are popular this season.

It's literally the pulse of the Web. Want to try it for yourself? Here's the best sites to visit.

Digg Labs
No one can match Digg for monitoring the hysteria of the moment -- links can soar to 5,000 Diggs in just a few days, and no one really knows why. Digg Labs helps you get a visual handle on the hoopla.

There are six labs, but each one taps into real-time Digg information. It's not experimental -- these are real Diggs from actual users, but the method of showing the data is unusual. Stack drops small tiles onto a graph that slowly builds into popular Diggs. Swarm is like a beehive where actual digg topics latch onto one another, following the progression of anonymous users.

Arc is - as you can guess - a group of Diggs that move around a circle. Larger text sizes means hotter topics. Big Spy -- perhaps the least useful tool -- shows larger text sizes for the most popular topics. And Pics is all about popular photos and graphics. (Be careful with this one at work, it can show you pornography on rare

Knowing that these tools can drain your Internet connection of all life and vitality, Digg Labs will pause automatically if you leave them open in your browser for too long.

Google Trends
Google Trends lets you compare terms such as "Barack Obama" and "Sarah Palin" to see who is more popular on the Web, and there's an interesting way to visualize the answers: When you search, you can view a bar chart with spikes that shows not only search topics (such as "Tiger Woods") but commentary from real posters on the Web, what Google calls real-time search. These comments include blog posts, social networking updates, and Twitter status.

"As the amount of information on the Web grows, the need for new ways to parse that information grows too," said Dylan Casey, product manager at Google. Casey explained that graphing tools give you the big picture, just as a ski resort might report on average monthly our yearly snowfall levels. The averages help you plan your ski trip beyond just knowing how much it snowed in the last week.

Using Google Trends, it's possible to see a graph over a historical period too -- say, for three years -- to see if the topic is becoming more popular. This could help a golf club manufacture plan a new product -- or a new advertising campaign boost interest.

Microsoft Pivot
Presented at the TED conference recently, Microsoft Pivot is a remarkable tool that lets you research Web information in real-time with a simple bar chart -- and it's a great way to watch Wikipedia.

Normally, Wikipedia entries are self-contained -- you can look up Barack Obama and read his biography, for example. But what if you wanted to research his accolades? Pivot shows you he was the Time Magazine person-of-the-year. You can then "pivot" this data and see every person-of-the-year, or click filters to see only African-Americans. This type of data exploration just isn't possible otherwise.

"Anything visual is more immersive," explains Brett Brewer, the Microsoft general manager in charge of Pivot, which is part of the Live Labs project. Pivot presents data in a way that makes exploration easier and leads to amazing discoveries. This kind of visualization uses a stock set of data -- say, Sports Illustrated covers or Wikipedia posts -- but could be used for any live data on the Web, such as accident reports. Pivot can show mortality rates, for example, letting you pivot the data to see in real-time that young men die in more car accidents than women.

Trendistic
Twitter.com has become a news outlet of sorts -- people tweet on topics almost immediately after they occur, and sometimes during the event itself. That's what makes Trendistic.com so valuable: the site shows the pulse of the Internet, including the most popular celebs, news topics, and gadgets. Are people talking more about the NBA or MLB?

Sociologists study these patterns by performing surveys and interviewing people (read any of Malcolm Gladwell's books, including his latest) but Trendistic is a picture into the soul of the Web. For any term, you can also see real tweets and start following what they say from your own Twitter account.

Cosmic 140
Another chart that shows Twitter trends, Cosmic 140 is the creation of Information Architects a Web design firm. The map -- which has not been officially released -- is amazingly complex, showing a "cosmological" chart that shows the most important Twitter users and how they are all connected to each other, starting with the three Twitter founders.

Explains founder Oliver Reichenstein, "We chose Twitter because (unlike Facebook) it allows us to access specific data and it features a lot of high profile people that define the new nodes based on tweets per day, number of tweets, and tweet content."

Trendrr.com
Trendrr.com, like Google Trends, shows topics as trends on the Internet, but goes a few steps farther. For example, the service can shows trends in how people are commenting on YouTube videos or track individual terms and phrases on Twitter. Broadcasters might use it to find out what people are saying about a new TV show, based on Facebook updates, Twitter comments, and actual usage data. In some ways, this is better than Nielsen Ratings system because it tracks real-time posts and commentary.

"People can use graphed Web info as a tool for business intelligence, to gain deeper market insights, for research or to keep tabs on an industry, product, and term," says Mark Ghuneim, the CEO at Wiredset, the marketing and strategic planning company that created Trendrr. "By visualizing Web data in graphical ways we can glean more important insights, faster."

It's not over yet!!

Good morning everyone. (all one of you that's following this blog *snicker*)
Normally I get on here just to hear/see myself think and there's something that I just have to put down...if, for no other reason than to help me think through it...Namely where I believe that economy is going. I hear so many pundits speak of "happy days" being here again, but I'm just not seeing it. (I know that this doesn't necessarily have to do with advertising, but it does affect our clients) I'm seeing some tentative job growth but as most of my life was spent in the financial services sector I'm not seeing the real rebound that's been expected. Certainly not a rebound that would be indicative of a stimulus package of just under a $ trillion dollars. Here's what I believe is happening. I believe that companies have gotten "lean and mean" out of necessity (I know we have) and I believe that those with necessary services and/or products have been making quite a bit of money in recent quarters. Now, do I believe that that will translate to job? Yes, but not immediately. I believe that those companies will spend that money on greater efficiencies brought about by software and equipment upgrades, which, in some cases, will eliminate the need to bring back certain types of employees. Sorry, but it's the truth. I believe that only after that spending cycle has come to a slow will companies then be able to determine what (if any) spaces they have to fill. Look for the always needed sales person, IT person, and customer service folks. Don't look too hard for anything middle management, or even lower "C" level management for that matter unless you're terribly specialized. Even then you might be better off hanging out your own shingle. Oh, and if you're going to do that, become a sole proprietor and contract out help as you don't want to get caught (as so many small businesses will) paying for increased employee health care costs. Not a terribly rosy scenario, but I was never good at the whole "up with people" thing. And this doesn't even include the debacle that is "COMMERCIAL REAL ESTATE." That's another story for another day, but just consider that most small business' fixed capital expenses come from salaries, raw materials and what? OVERHEAD...one of the efficiencies they'll be looking hardest at is unloading that expensive office space. And who is in a position to come in and pick up the leases...even with modest job growth. There's just not the appetite (even among contrarians) to pick up such assets, no matter how cheap. Not when they can create better and more efficient means of production, sales, distribution, marketing, etc., which leads directly to a better bottom line. If this turns quickly, look for just as quick a reversal...and this time the government won't be able to offer a bail out...Why? Because the American people just don't have the money (because as we all learned in our early civics classes, the government has no money except for what is given to it by the people) AND WE'RE BROKE!
I hate to sign off as usual with such a dour entry, but I do sincerely wish anyone reading this...

Best Always,
Dave J.

Amazing

This past week, while on vacation (yep, actually took one) I was thinking on the value of social networking. I have come to the conclusion that one of the most valuable services we offer here at WPM/iA is our social marketing service where we handle the day-to-day details for our clients. The reason being...IT'S TOO TIME CONSUMING! I mean, between two Twitter accounts, a blog, personal and corporate Facebook accounts and a LinkedIn account profile it a wonder that I have any time during the day to get business done. So, the question then becomes one of priorities...run the business or provide content to all the different profiles out there. And I'm guessing that it's not any different for other business folks out there. And now, just today, I read about "Bubbling" (see excerpt from AdAge)

NEW YORK (AdAge.com) -- In India, thousands of consumers are going from tweeting to bubbling. A hot new social-networking service dubbed Bubbly, which is essentially a voice-based Twitter, is quickly gaining popularity among Indians. And thanks to Bollywood celebs being early adopters, Bubbly is growing and with virtually zero marketing spend.

So, with this new "turn of the crank" set to slam onto America's shores within the next year the question becomes crystal clear. Obviously there will be wave after wave of new technology to keep us ever-connected to one another, but which ones will be most effective and not take up too much time out of my day. I hope I'm up to the task of determining the correct path, not just for myself, but for our clients. Looks like I've got a lot of homework to do!

Best Always,
Dave J.

Completing the circuit

It was pointed out nicely today that I have been absent from my blog post. Not that many people actually read my rantings and ravings but for those few that do, no, I did not die. But rather I came to the realization some time ago that business is much like life in that the more self-sufficient you can be the better your chances for success. So, with that in mind I set about making it happen...we have the WPM Group which provides consulting and full-service advertising...we have iAdvertizing.com which provides companies with high-quality, affordable marketing and advertising, and now we have__________________(the project I've been working on). This new project is something that I just have to keep under wraps for right now as it's a potential game changer for the outdoors industry. It has to do with what I've done for the major part of my professional adult life. It is the missing piece to the puzzle for the other two entities mentioned above. It helps to complete the circuit by taking the strengths from the divisions we already have and brings business to them...we won't be totally depending on outside sources to make our markets for us. I would encourage those of you who have staked your own claim in the world of business to think along the same lines. What can you do that will help lessen your dependence on other business referral sources. What can you add to your offering that will bring more business to your door automatically. I'll be on the road for the next little while but when I am back in the office and fully re-engaged I'll throw back the curtain on this "venture" and connect the dots for those of you who are interested. I really think you'll like what you see! I know I do, so far!

Best Always,
Dave J.

Calculating Your Ad Budget

One of the best pieces I've ever read about calculating an ad budget was passed on to me in early 2003. Rather than using the old 5-6% of sales measure for creating my ad budget, I've used the following formula and it's been terrific!

First, before starting (and I know this is business 101 for most of you but please bear with me.

MARGIN is Gross profit divided by Gross Sales Volume

MARKUP is Gross Profit divided by Cost of Goods

Be sure to plug in MARKUP, not MARGIN when figuring your ad budget. Let's say that you have a business averaging 100% markup (keystone) or in other words a 50% Gross Profit Margin.

Take that and multiply the average markup by your cost of exposure...for most businesses the cost of exposure is = to a percentage of your projected sales. I use 10%.

So, if my projected sales are $300,000 per quarter the ad budget calculation looks like this:

30,000 x 100% = $30,000

Now, take that $30,000 number and subtract out your cost of exposure..your website, storefront, rent, etc. for the quarter. Let's say that's $7,500.00

$30,000 - $7,500 = $22,500 and there's your ad budget for the quarter.

if, however, my average markup is only 86% it would shake out as follows:

30,000 x 86% = $25,800

$25,800 - $7,500 = $18,300 remaining for ad budget.

It's a simple formula and while not every simple formula such as this is going to fit every business you can modify it so that it can provide a "make sense" number for you in these otherwise very confusing times...and if nothing else, you have a firm number in mind when shopping for the various marketing/advertising options out there that you can choose from. I do hope that this helps...it's what I use and it hasn't failed me yet!

Best Always,
Dave J.